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PAC Conference, continued from page 1 . Conunissioner Wheelock con- cluded her corrunents by saying that \vith such a large percentage of the state's budget concentrated on transfers to other units of government, the governor has everything "on the table" as they begin to identifY solu- tions to the state's budget shortfall. With the acknowledgement by Commissioner \Vheelock that the December state budget forecast could show a substantial deficit and that all areas of state spending will be re- viewed, city aid programs will almost certainly be part of budget-balancing discussions. Between now and the end of the current state biennium, there are three remaining state aid payments to cities. 1'his Dec:emhees aid payments would not likelv be affected by any budget balancing actions. However, the July and December aid payments due in 2002 could be affected. This presents a challenge given that cities are currently crafting 2002 budgets based on the 2002 aid notices distrib- uted by the Department of Revenue this past July. If aid payments are reduced by legislative action after the final property tax levies are certified this December, cities will have little choice but to cut spending, draw down reserves or borrow money on a short-term basis. City officials may . want to consider these potential implications as they set final levies and adopt their budgets this full. While the i-ainy day fund will help the state address any future budge, shortfall and potentially reduce the need for budget cuts, Canmus- sianer Wheelock also said that these resources might not be sufficient to prevent budget cuts this neAl session. Despite that prediction, Wheelock pointed out that few states are in as good financial shape as !v1innesota. The morning session also in- cluded a presentation by Department of Revenue Commissioner Matt Smith, one of the chief architects of the 2001 property tax reforms package. His comments focused on the objectives of property tax reform, including the goal of making the property tax a smaller tax, a simpler tax, and a more local tax. Conunissioner Smith indicated that under the 2001 reforms, the property tax would be smaller due to the state takeover of general education property tax levies. According to Smith, the 2001 tax reforms will make the property ta:, system simpler and more understandable by reducing and compressing the number of property classifications. He suggested that in the future, the property tax will be more local and more account- able due to the fact that the level of property taxes will be more closely aligned with the decisions of city and county elected officials. Smith went on to summarize the preliminary estimates of tax relief due to the inter.lction of the 2001 prop- erty ta..'\: reforms and the 2002 property taxes proposed by cities, counties, and school districts. Smith indicated that of the $176 million in new school referendum requests that were on the November 6 ballot, only about $64 million was actually approved by voters, mostly in Grea[er Minnesota. For cities, Smith said that based on the September 15 preliminary property tax levies, 125, or 60 per- cent, of the cities affected by levy limits had proposed levies up to the levy limit. For all cities, the Revenue Department's analysis indicates the ovetall proposed city levy increase for 2002 was 17.1 percent, which includes the levy increase in many cities for the loss of state aids. In total, Smith said that total property taxes will be $443 million lower in 2002, which is $220 million less relief than was estimated at the end of the legislative session. Despite this reduction in the amount of tax relief, he suggested that virtually all types of property will see a tax reduction in 2002. Smith concluded his comments by looking ahead to state/city tax policy issues that must still be ad- dressed. Commissioner Smith told attendees that we will likely revisit the appropriate role of the state in supporting local services and issues related to the flexibility and au- tonomy oflocal government finance in Minnesota. For an overview of other issues discussed at the 2001 Policy Adoption Conference, see pages S-6. t' e e YOUR CITY NEEDS A STATE-OF-THE-ART WEB SITE AT A COST YOU CAN AFFORD GovOffice Webcreator-Created for cities, by cities Your city government wants to build a web site to communicate with citizens, explain city services and efforts, and encourage community feedback and involvement. Where do you begin? .. GovOffice Webcreator-a new service from the League of Minnesota Cities N in cooperation with Avenet, ICMA, and Microsoft-can hdp. go FOR ADDITIONAL DETAILS AND PURCHASING INFORMATION: ~ Contact Tyler at Avenet. toll-free (877) 564-4979 or e-mail: info@govoffice.com . Visit the GovOffice web site (www.goyoffice.com) or the LMC web site (www.lmnc.org) e November 21, 2001 Page 3