‘A building year’ for local governments

Blaha talks fiscal trends, concerns for local government

Local governments across Minnesota are still in the process of building back from the effects of the COVID pandemic, according to a fiscal trends analysis from the Office of the State Auditor.

"Basically, Main Street is in a building year," State Auditor Julie Blaha said Monday. "As the effects of the pandemic are waning, we're seeing local governments are working to both rebuild, replenish resources and other things that they used up during the pandemic, and also prepare for future challenges."

Local government representatives said the challenges they face range from the rising cost of infrastructure repairs, to employee costs and the costs of vital services like fire prevention and ambulances.

Blaha gave a 2024 "State of Main Street" online presentation on Monday morning. The presentation looked at changes in revenue and spending for Minnesota counties and cities between 2023 and 2024. Their analysis used data from county and city budget reports.

For Minnesota counties, the percentage of total budgeted revenues that came from taxes decreased in 2024, while the percentage of intergovernmental revenue sources - like federal, state and local grants - went up. For cities, the percentage of taxes and intergovernmental revenue stayed the same from 2023 to 2024, the report said.

Minnesota counties saw the percentage of budgeted current expenditures increase in 2024. The greatest percentage increases in expenditures came in capital outlay for streets and highways, general government and health. For cities, the percentage of budgeted current expenditures went down in 2024, while capital outlay increased slightly. The greatest percentage increases in current expenditures were for human services and conservation of natural resources.

The State Auditor's Office also looked at more long-term trends for Minnesota townships. Townships aren't required by law to send their budget numbers to the OSA, so instead the analysis looked at actual township data over the past 20 years.

According to the report, the portion of Minnesota township revenue coming from property taxes has decreased over the past 20 years, while intergovernmental revenues increased. That trend had accelerated since 2019.

The amount of township expenditures on roads and bridges increased over the past 20 years, the report said. When adjusted for inflation, total township expenditures have also increased over the past 20 years.

Over the past 20 years, County Program Aid, Local Government Aid, and Town Aid have made up an increasingly smaller portion of county, city and town revenues, the report said.

Part of Monday's presentation included discussion from several local government representatives from around Minnesota.

Jim Checkel, a township supervisor in Ashland Township, Dodge County, said rising costs were a serious concern for his township.

"What we've been seeing in Ashland Township is three major things that are causing us to have to increase our levy," Checkel said. "One is the increased costs of road maintenance. The other is the increased cost of the help that we have come, and another thing that we have is the cost for ambulance services."

Checkel said the township had to ask voters for help with ambulance and other costs that came to a total 16% budget increase. "It's the most we've ever asked for," he said.

Mary Jo McGuire, a Ramsey County Commissioner and a past president of the Association of Minnesota Counties, said Ashland Township wasn't the only place affected by those same needs.

"We can say that these trends are generally, universally felt by all counties in the state," McGuire said. "I think most counties have had to increase their property taxes, and take advantage of other state and federal revenue sources."

Minnesota counties continue to see a high demand for services, even after the COVID pandemic, McGuire said. At the same time, the additional resources counties received during the pandemic only just started to address some long-term needs, McGuire said. "We were just starting to address those gaps, and some of those dollars have gone away now. So, we're needing to continue to rely on our state and federal partners, and then of course we have to rely on property taxes."

Blaha said a balanced approach to building up local government resources would be important in the future.

"To handle those upcoming challenges, it's tempting to think, let's just keep building up those reserves at the expense of infrastructure," Blaha said. "What we're suggesting is that a balance is going to be needed."

"What we have learned during the pandemic was that it wasn't just reserves that were helpful, it was already existing infrastructure. Those reserves didn't go as far if you had to rebuild something from zero," Blaha said. "The idea is, let's make hay while the sun shines . . . This is a really good time to both build reserves, and also refresh and rebuild infrastructure as well."