In Legislature's waning days, property tax relief becomes hot issue

Many Minnesota homeowners saw double-digit property tax increases this year, and a non-partisan House Research Department report projects an 11-percent increase statewide next year as well. Legislators are getting an earful from disgruntled constituents, but they don't agree on the best way to alleviate the complaints.

Democrats have one idea. "Permanent property tax relief," says Senate Majority Leader Dean Johnson, a DFLer from Willmar, who says long-term property tax relief is Democrats' highest priority.

DFL leaders want to achieve that by increasing state funding for cities, counties and schools. The Senate passed a bill that would increase local government aid by about $260 million. There's no guarantee local governments would pass all of that money along to taxpayers by cutting property taxes, but Senate Taxes Committee Chairman Larry Pogemiller, a Minneapolis DFLer, says the Senate bill would lead to smaller property tax increases.

"I don't know if we can quite cut it in half with this kind of property tax relief, but I bet you we can get close to cutting it in half. So get it down certainly to single digits, and maybe down to 5 or 6 percent, which I think is a little more reasonable," according to Pogemiller. Pogemiller says past Republican budget cuts to local government aid are to blame for the hefty property tax increases of recent years.

Republicans say local governments can rein in their spending, just like the state had to do during tight budget times. Republican House Speaker Steve Sviggum of Kenyon says boosting local government aid -- LGA -- is not the most effective way to try to drive down property taxes. Sviggum points out that not all cities receive the state funding.

"I don't think that LGA, first of all, is the most fair way of bringing property tax relief. Half the citizens of Minnesota don't get LGA. Talk about any farmer, talk about anybody who lives out in a township, they get no LGA. Talk about citizens who live in communities like Orono or ... Eagan; they get no LGA," Sviggum says.

Sviggum says the best way to make sure that property tax relief gets directly to homeowners is to send them rebate checks. The House passed a bill that would use $275 million in a tax relief account for rebates equal to 9 percent of a homeowner's 2006 property tax bill.

Gov. Pawlenty says the House GOP rebate plan is a good short-term fix.

"I wish they would pass our property tax freeze or limit on property taxes as a permanent fix, because if you do the one-time buydowns or the rebates, it doesn't fix the problem permanently, which I'm more interested in, but one-time relief is at least a plan B that's worth considering," Pawlenty says.

Democrats call the rebate proposal an election-year "gimmick." The checks would be mailed out in October, right before the election. House Minority Leader Matt Entenza, a DFLer from St. Paul, says the rebates will merely mask the effects of past budget cuts.

"A one-time check makes you feel good, but it doesn't solve the problem," Entenza says. "And that's why it's a Band Aid that isn't actually any medicine; it's just a cover-up. We need permanent property tax reductions, and we can do that, and we should do that this year."

While neither side appears willing to give on this issue, there are signs that lawmakers are looking for a compromise. Speaker Sviggum says it's possible the final budget solution will include both proposals - some money for rebate checks, and more aid to local governments.