Property tax debate under way with cuts favored by policymakers

ST. PAUL -- Competing efforts to create relief for property taxpayers are off and running.

And it doesn't get much more competitive than how to provide funding to cities, a method of cutting property taxes most policymakers favor. But the answer to perhaps the biggest question -- how much -- may be weeks away.

Gov. Tim Pawlenty's budget would supply $150 million in property tax relief over two years, though Senate leaders said they won't know how much their contribution will add up to until a budget forecast is released in late February.

Still, Democrats expect aid to cities to eclipse what Pawlenty has in mind.

"It'll be significantly more money," said Sen. Tom Bakk, DFL-Cook, calling the governor's proposal "woefully inadequate."

Many Democrats scoffed after learning of Pawlenty's proposed $20 million increase in Local Government Aid. Those funds would go toward restoring $125 million of cuts made to LGA in 2003 by the governor and Legislature during efforts to balance a budget that ran well into the red.

"Now that we're back on solid footing," that funding will begin to be restored, Pawlenty said during his budget announcement Monday.

Senate Minority Leader Dave Senjem said Pawlenty's LGA offer is "probably not realistic" and may undergo changes.

"This is a mix and mash process," the Rochester Republican said. "It's a starting point."

Included in Pawlenty's plan is a provision that steers LGA funds for cities with more than 100,000 people toward public safety. That only would apply to Minneapolis and St. Paul.

Bakk said that won't see the light of day in a bill that got its first look Tuesday in a Senate tax committee.

"That won't be in the Senate tax bill," he said flatly. "I'm not going to tell those local units of government how they spend their state aid."

Sen. Julianne Ortman of Chanhassen, one of two Republicans sitting on the Senate property tax committee, tangled with colleagues Tuesday over whether cities should be immune from sales taxes on bonded projects.

While the DFL-controlled committee shied away from the idea, Senjem said that issue isn't dead.

"That, to me, ought to be one of the No. 1 considerations," he said.

Despite sticking points like LGA, many of the same areas - increasing state aids to education and homestead market value credits - are taken up in the governor's and Senate Democrats' proposals.

"He's got some of the same issues areas where he wants to spend some money," Bakk said.

Senate property tax committee Chairman Rod Skoe, DFL-Clearbrook, agreed, saying his committee will aim for taxpayers to "get the most bang for our buck."

"There's similarities there," he said.

Other provisions offered in the Senate Democrats' bill include increasing property tax refunds and sending more aid to both cities and counties.

Paired with $40 million in state aid to schools, Pawlenty's property tax relief package also increases aid to counties by way of jails and welfare systems.

Pawlenty's county funding qualifies as property tax relief by assuming each dollar sent to communities goes directly back to taxpayers, said Revenue Commissioner Ward Einess.

Bakk echoed Pawlenty's call for fiscal restraint at the local level.

"If people think they're going to double-dip," he said of irresponsible local spending, they should know "that's unacceptable to me."