Study: State fees up $446M

01/27/2006

GOP says increases preferred over income tax hike

BY PATRICK SWEENEY
Pioneer Press

The fees Minnesotans pay for state government services are now about $446 million a year higher than they were before Gov. Tim Pawlenty took office, according to a new report by nonpartisan Senate fiscal analysts.

Senate Majority Leader Dean Johnson, DFL-Willmar, said the numbers show Gov. Tim Pawlenty has relied on fees — especially $200 million a year in new revenue from a cigarette fee that is being challenged in court — to keep a no-new-taxes campaign promise he made four years ago.

“Call it what you want, it’s still money out of the citizens’ checkbooks,” said Johnson, whose top aide requested the budget analysis.

Brian McClung, a spokesman for Pawlenty, defended the fee increases. He said the portion of the state budget made up of fees has increased only slightly: from 3.5 percent to 4.6 percent in three years. He called fee increases preferable to a big income tax increase that Johnson and Senate Democrats proposed last year.

“Given the choice between Democrats’ job-killing, highest income tax in the nation and a small increase in the percentage of total revenue from user fees, this is an appropriate adjustment,” McClung said.

In addition to the 75-cents-a-pack cigarette fee, the Legislature and Pawlenty, a Republican, enacted new or higher fees for scores of state services in budget deals in 2003 and 2005.

The “health impact fee” levied on cigarettes, the biggest of the fee increases, was ruled illegal by a Ramsey County District Court judge in December. The state is appealing the ruling to the Minnesota Supreme Court.

A sampling of activities covered by the increased fees include boiler inspections, trout and salmon fishing, cross country skiing and beekeeping. The budget-balancing bills also included requirements that low-income and disabled people who receive state-subsidized health care pay a number of new or increased co-pays for drugs and medical and dental care.

State Finance Department officials, who previously had released fee summaries that included most of the new revenue counted by the Senate fiscal analysts, questioned the propriety of counting as state fees the co-pays, which go to medical providers.

State budget director Jim Schowalter said those co-pays, and nursing home surcharges that the budget bills required some nursing home patients to pay, were not direct income for the state and were not counted by the Finance Department as state fees.

But Schowalter said his quibbles with the methodology of the Senate budget analysis were small ones that make a difference in the fee total of only about $50 million a year. “The underlying data really aren’t in question,” he said.
In addition to questioning the fees, Johnson and other Democrats have accused Pawlenty of avoiding state tax increases while accepting double-digit percentage increases in local property taxes levied by cities, counties and school districts.

Tax data from the nonpartisan House Research staff predict property taxes statewide this year will total about $5 billion, up $1.3 billion from 2003, when Pawlenty took office. That’s a 26 percent increase.

Johnson said his criticism of Pawlenty’s reliance on fees applies equally to the property taxes.

“You’re getting woefully close to $2 billion in taxes/fees increased during this governor’s tenure,” Johnson said. He accused Pawlenty of supporting fees and property taxes while successfully opposing a Democratic effort to reduce tax breaks for corporations that have foreign operations.

House Speaker Steve Sviggum, R-Kenyon, praised Pawlenty for keeping a lid on state taxes and spending, and he accused Johnson of now criticizing fees that are paying for spending Johnson supported.

McClung said property taxes are a local responsibility and that local school officials sought approval from Pawlenty and the Legislature for big property tax increases that many districts are levying this year.

online

Senate officials plan to post the fee analysis on the Senate’s Web site today. Go to http://www.senate.leg.state.mn.us and click on Senate Office of Fiscal Policy Analysis and then fiscal tracking documents.