Local governments in Minnesota have kept revenues and spending even over the past two decades despite threats to their financial stability. But government leaders should be conscious of impending challenges, according to a report published today by the Office of the State Auditor.
The report, titled “The State of Main Street: Holding Steady…For Now,” relied on 20 years of local government data and meetings held across the state. Localities have faced a number of pressures, the report found, including demographic changes, declining state aid, increasing mandates from state and federal programs and unexpected costs from health needs, weather and errors, like the Department of Human Services overpayments discovered in 2019.
To keep revenues steady, local governments have increasingly relied on property taxes as funding from the state and other sources has declined, according to the report. They have also sought more grants, cut services, used reserves and improved planning.
“But there are increasing pressures on the horizon, and local governments have used many of the easily available budget stabilizing solutions already,” the report says. The office recommends local government leaders follow five tips to promote financial stability, including: using funding sources “with minimal strings attached;” reducing costs with local partnerships; and, long-term planning with ongoing issues like climate change in mind.