Closing Funding Gaps – Focus on Operating Levies

Seasonal & Recreational Tax Base Replacement Aid

Important legislation, SF 4995, will be introduced today by Sen. Grant Hauschild (DFL Hermantown) and Rep. Dave Lislegard (DFL Aurora) aimed at addressing the lack of voter-approved operating referendums in 92 school districts, primarily in central and northern Minnesota. Twenty-three years ago the legislature decided that Seasonal & Recreational property (class 4c12) would pay into a state levy instead of being taxed as part of the school operating levy tax base called “Referendum Market Value.” There are many reasons why these rural districts have struggled to pass voter-approved operating levies and missing the “cabins” from the local tax base has contributed to this situation, leaving homeowners in town with a sense of unfairness at the situation.

The new legislation doesn’t change how Seasonal & Recreational properties are taxed, instead it creates a tax base replacement aid aimed at lowering the local tax effort when voters say “yes” to approve an operating referendum. In school districts with a substantial amount of seasonal recreational residential property, the tax effort on the referendum levy could be reduced by as much as 50%. The specific amounts of relief will vary, and this is still a voter approved levy. In fact, the proposal will lower local tax efforts in districts that have current voter approved operating levy authority.

Thank you to the chief authors and co-authors of the bill. MREA is still working to get cost estimates for the bill as it relates to the state’s general fund. When those are produced, it might be possible for local school district officials to run homeowner property tax scenarios with and without this program. We expect this legislation to be less expensive to the state than a broader operating levy equalization effort, which is important to advocate for over the budget cycles to come.

In the meantime, this is a more targeted approach that will hopefully help improve the conversation locally for many schools in “lakes country north” who have struggled to get away from $0/pupil on the operating referenda program.