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Dayton to counties: No relief in surplus

Dayton was speaking at the annual convention of the Association of Minnesota Counties. He predicted “big property tax increases this year and next” as counties struggle to make up for declines in state aid programs even as property owners contend with the elimination of the homestead market value credit — a popular program that reduced most peoples’ property tax bills.

Dayton called property taxes “the most unfair tax of all — you have to pay it whether or not you have a job or an income.” The Democratic governor said he’d like to lessen pressure on property taxpayers with income taxes that take more from wealthier earners — but said he wasn’t likely to make another big push for those changes until at least 2013, after the next legislative election.

It’s an understandable strategy for Dayton, who’s found Republican legislative leaders highly unreceptive to his proposed income tax hike on the wealthy. But county commissioners at Monday’s meeting in downtown Minneapolis said their budgets are quickly stretching to the breaking point.

“We’re running on the bare bones,” said Rachel Reabe Nystrom, Crow Wing County commissioner. Nystrom said she and fellow commissioners managed to reduce their property tax levy the last three years in anticipation of state aid cuts — but that most property owners in the area will still see higher property tax bills this week, thanks to the elimination of the homestead credit.

“People don’t have money to pay more taxes,” Nystrom said. “We’re on the front lines of these decisions — we’re the ones in line with folks at the grocery store.”

Few commissioners had a serious expectation that lawmakers, when they reconvene in St. Paul at the end of January, would have the will or the resources to restore any of the lost state aid. Dayton and lawmakers did learn last week of an unexpected $876 million state budget surplus, but that money by law must be held in reserve.

If the surplus grows by late February, Dayton said, additional proceeds should be used to repay Minnesota school districts who’ve seen their own aid payments delayed in order to bridge a budget deficit earlier this year.

“We’re not expecting anything more,” said John Baerg, a Watonwan County commissioner from St. James, in southwestern Minnesota. “We just hope we don’t lose anything.”

Several commissioners spoke of bottled-up need, particularly in the area of road and infrastructure projects. “We could sure use more money for roads,” said Richard Samuelson, a Goodhue County commissioner from Cannon Falls.

Baerg said he and allies would use the convention to get county leaders from around the state to coalesce behind a series of legislative changes to how counties operate. The “Minnesota Accountable Government Innovations and Collaboration,” or MAGIC Act, would aim to free counties from some state mandates and allow county leaders greater flexibility in decisions about using county resources.

Dayton is not free from responsibility for the very budget-balancing maneuvers he decried before county leaders, which were the result of compromises between the governor and Republican legislative leaders that ended a 20-day partial state shutdown last summer. But Dayton said he only signed off because Republicans were unwilling to endorse his favored approach, noting his earlier opposition to both the local government aid cuts and the elimination of the homestead credit.

Dayton said in the second half of his first term, starting in 2013, he was likely to get behind a major overhaul of the state’s system of income, sales and property taxes.