State of Main Street Report Reinforces Indicators of Stability

February 18, 2020

The state auditor’s report reinforces common city priorities supported by the League, such as local control and stable, predictable forms of state aid.

The Office of the State Auditor (OSA) released “The State of Main Street” report on Feb. 12, indicating that cities, townships, and counties in Minnesota are in a position of fiscal stability, but changes to any of five key factors could upset that stability.

State Auditor Julie Blaha presented the report’s findings at a press conference, which also included local government officials to address aspects of finance and service provision.

The report reinforces common city priorities supported by the League, such as local control and stable, predictable forms of state aid.

Blaha’s office analyzed data from 1998 to 2017. Last December, the OSA held a series of listening sessions with local officials to gain insight and perspective about the report’s data. These conversations provided additional understanding and context, said Blaha.

The report identified the following themes that support stability:

  • Local control can be effective in keeping local budgets stable.
  • Partnerships can reduce local costs.
  • Falling intergovernmental aid has shifted local costs to more regressive forms of taxation.
  • Surprises have a bigger impact than the sticker price.
  • Long-term planning, including consideration of emerging issues like climate change, can improve stability.

State aid and other trends

The report indicates that a tipping point was reached during the Great Recession, when cuts in state aid to cities and counties resulted in more rapid property tax increases as a percentage of revenue for local governments. Cuts to state aid forced larger increases in more regressive forms of taxes, including the property tax, said Blaha.

Deep cuts in local government aid (LGA) were imposed in the post-9/11 recession and in the wake of the Great Recession, and after 18 years, LGA funding was finally restored to the actual appropriation level last seen in 2002.

Blaha also noted that the report does not fully capture the role that partnerships play in service delivery budgets among local government entities, indicating where reductions in investment are shown, some of that work has shifted to collaborative service delivery models.

Local officials invited

Local government officials also made comments at the press conference. Albert Lea Assistant City Manager Jerry Gabrielatos explained that the emerging issue of climate change and its impact on water infrastructure is an example of a source of financial stress that local governments are facing.

Ramsey County Board Chair Toni Carter, Dakota County Board Chair (and former Hastings City Councilmember) Mike Slavik, Stearns County Commissioner Tarryl Clark, and Stillwater Township Board Chair Sheila-Marie Untiedt also spoke.

—Read the State of Main Street report on the OSA website