ST. PAUL — Few cities and counties in Minnesota planned for their budgets to grow in 2021, state officials said Wednesday, March 10, and some likely made small cuts from them.
Those findings, fresh from the Minnesota Office of the State Auditor, reflect a continued caution that local governments are taking in light of the coronavirus pandemic, even in the aftermath of a more stable 2020 than many had expected.
"Minnesota cities and counties faced a difficult balancing act in 2020 and, on average, they stayed on their feet. So while things have been tricky, there are some news that can give us some comfort. But we should also keep vigilant," State Auditor Julie Blaha said at her office's "State of Main Street" address.
Numbers reviewed for Wednesday's address, broadcast online, have yet to be fully audited and thus may not reflect the adopted budgets of some cities and counties. Nor do they don't account for government enterprise funds, which support themselves through the sale of goods and services.
But what they do reflect, auditor's office officials said, is a conservative stewardship of public funds and the stabilizing effect of relief funds for local governments.
In Congress's first pandemic relief bill, passed last March, approximately $150 billion in aid was set aside for states, cities and counties. Some $841 million of that was funneled in Minnesota to cities and counties.
U.S. lawmakers' passage of another stimulus package for $1.9 trillion Wednesday guarantees additional funding for local governments to the tune of $155 billion, though the projections reviewed by her office likely did not account for it.
"I can guarantee you that nobody was budgeting with the assumption that this third stimulus was going to pass," Gary Carlson, director of intergovernmental relations at the League of Minnesota Cities, said during a phone interview Wednesday.
Figures discussed Wednesday stood in contrast to county and municipal budget projections for between 2018 and 2019, which have been audited and showed an average increase in expenditures and revenues of approximately 6% compared to the year before. Officials said proposed budgets for local and county governments in 2021, by comparison, were mostly flat with those of 2020, if not slightly smaller than that in some cases.
Some localities may be weathering 2021 by holding off on less pressing infrastructure projects, according to auditor's office research analyst John Jernberg.
"We did notice some decreases in capital expenditures," he said Wednesday.
Cities and counties are planning to balance their budgets through the partial use fund balance, or assets leftover from a given fund after its liabilities have been met, but are for the most part unlikely to draw down their reserves excessively, according to Jernberg.
In a sign of the pandemic's effect on travel and tourism, however, cities and county budgets projections for the year do anticipate the loss of tax revenue generated by lodging, merchandise sales and liquor sales. For cities, tax revenue not generated by property — which accounts for most of the tax revenue that local governments collect — were projected to decrease by nearly 27% from 2020.
To make up the difference, then, property tax raises were planned. Cities and counties proposed hikes of 4.3% and 1.3%, respectively, for the year, officials said Wednesday.
The auditor's office noted Wednesday that because the effect the pandemic is having on property values — which are used to calculate property taxes — has yet to become clear, meaning its long-term effect on local and county government budgets may by extent take time to come into focus.