While the recent property taxpayer survey would seem to indicate that most folks believe the county gets all its money directly from people’s pocketbooks, it is a little more—note, I said, “a little more”—entangled than that.
Among the many survey respondents, there were those who suggested the source of county revenues be explained, and perhaps adding flow charts and pie graphs would be helpful.
While I will not be including any pie graphs, due to space limitations, there’s nothing preventing you from enjoying a piece of your favorite pie while reading this …
So let’s attempt to untangle some of the mystery using sources of reliable information from the Minnesota State Auditor’s Office, the Association of Minnesota Counties (AMC), and the National Association of Counties (NACo); all with whom Cook County is affiliated.
From AMC’s “County Government Revenue” publication: “In Minnesota, local governments derive the majority of their funding from property taxes and from state and federal grants. Fees, fines, forfeitures, the sale of public lands, investments, gaming revenues and special assessments are other sources that augment these major revenue sources.”
Cook County’s revenue sources are disbursed into five basic categories, according to the Minnesota State Auditor’s Annual Cook County Audit (www.osa.state.mn.us/ under Reports & Data; scroll down to Counties); if you are really into noodling nerdy numbers.
In the last half-dozen years, each of these five basic categories—as a percentage of total county revenues— has essentially stayed within 5 percent of previous years.
So let’s look at these five categories a bit closer.
Operating grants and contributions (Monies received from state or federal levels of government (e.g., Payments in Lieu of Taxes (PILT); Public Health & Human Services grants; Secure Rural Schools program (SRS); etc.)
While property tax is the chief source of revenue for most Minnesota counties— averaging between 30 and 50 percent of their revenues—Cook County receives the majority of its money from operating grants and contributions. According to the 2016 State Auditor’s Audit, this amounted to 38 percent of the county’s total revenues; consistently the top source of revenue for Cook County.
Generally, these grant monies assist the county in providing and paying for mandated services (services “commanded” from a superior government authority). However, the amount of the grant is often insufficient to cover the full cost of services and the county must supplement the state or federal revenues with local property tax dollars.
Counties typically possess little discretion over where to utilize these financial resources. Most often, according to NACo’s 2016 publication, “Doing More With Less,” “93 percent of the state and federal funding used by a county is restricted to specific activities” …keep in mind these “specific actives” actually require more money to provide than is bestowed by the intergovernmental agency.
According to the interviews with the state associations of counties and other state and county officials, nearly three-quarters (73 percent) of states are requiring counties to do more with what they have, decreasing state funding to counties or a combination of both. Over the past decade, counties in more than half of all states are experiencing a greater proliferation of mandates from states. Nearly half (45 percent) of state associations of counties reported counties receiving reduced state funding and facing more state mandates over the past 10 years.
According to the November 2016 NACo article, Minnesota ranks among the highest in this disesteemed group.
While it seems to go without saying—you would think—counties need the state and federal governments to provide full funding to cover the compliance costs of the mandates they impose.
American economist and 1976 Nobel Prize recipient in Economics Milton Friedman adroitly pointed out, “You can spend your own money on yourself. When you do that, you really watch out what you’re doing, and you try to get the most for your money; or you can spend somebody else’s money on somebody else. And if you spend somebody else’s money on somebody else, you’re not concerned about how much it is, and you’re not concerned about what you get. And that’s government.”
Property Tax (We all know what this is)
In 2016 property taxes accounted for 29 percent of the county’s revenue (keep in mind this percentage only represents the amount of property tax dollars we are allowed to keep; the rest goes into the state’s general fund –somewhere between 20-30 percent of the total property tax revenues collected.
While you probably don’t need to have this called to your attention, Minnesota has one of the most complicated property tax systems in the nation. Adding injury to insult, Minnesota hits its citizens with the fifth-highest total state tax burden in the country (property taxes, individual income taxes, and sales taxes), behind just New York, Hawaii, Vermont, and Maine.
Other general revenues
(Monies from local sales taxes; investment earnings; dividends from insurance, etc.)
Other general revenues amount to 13 percent. While the county has maximized its ability to add additional local sales taxes, traditional revenues anticipated from investment earnings have dipped considerably in recent years . . . but a lot of you already know this from personal experience with investments.
Capital grants and contributions
(Monies granted by intergovernmental agencies for road construction and maintenance; airport development, etc.)
Capital grants and contributions amount to 10 percent.
Fees, fines, charges, and the “catch-all” other
The law permits certain fees to be charged for services provided by various county departments. Counties charge fees for, among other things, examining the record for taxes due, serving and filing legal papers in court actions, and renewing licenses. Most of the money generated by these fees goes into the county’s general revenue fund.
Fees, fines, charges, and “other” amounted to 10 percent (some of you reading this honestly believe you contributed that 10 percent all on your own!).
Bundle these dollars together, and plunk them in the county’s piggy bank and this is what’s available to spend.
And as Mr. Friedman would remind, “Government does not tax to get the money it needs; government always finds a need for the money it gets.”
How’s that piece of pie coming along . . .
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