Mille Lacs County Budget 2022
Mille Lacs County is required to certify a preliminary property tax levy each September for the following year. The levy is based on the County’s estimated operating budget for the following year, and reflects the amount of property taxes needed to fund operations after accounting for other revenue and expenditures. In 2022, that amount is $22,339,589, which represents a 24.5% increase over the 2021 levy.
The budgeting process starts in July with individual departments reviewing historical revenue and expenditure data, using that information to assemble their proposed budgets. These individual department budgets are reviewed with the Administrative Services Office and compiled to form the complete county-wide budget. Subsequently, staff meet with the County Board of Commissioners to review the proposed budgets and make adjustments before setting the preliminary property tax levy.
- Budget Summary Information. The chart below shows the net difference in actual revenue and expenditures, essentially, how far the County was “over” or “under” budget, for the last 8 years.
- Levy Impact. This chart shows how property tax dollars are allocated to each service area or department based on the preliminary budget for 2022.
- Revenue and Expenditures. These charts show how much revenue, outside of property tax dollars, is received by each service area or department; and, what it costs to “run” each department, based on the preliminary budget for 2022.
The increase being proposed for 2022 is a reflection of many variables; some of these items are unique to the 2022 budget cycle, while others have persisted (and may continue to persist) for years. Some of these variables include:
- Historically low levies with respect to inflation and actual costs. From 2006 to 2020 the levy has increased, on average, approximately 2.9% each year. In that same time period, the consumer price index (CPI) has increased, on average, approximately 1.9% each year. In six (6) of the last 15 years, the levy was 0% or negative. This doesn’t account for the 3% levy increase certified for 2021, which has already been exceed by increases in CPI, though final numbers for 2021 won’t be available until 2022.
Additionally, over the last few years, the County has under-budgeted expenditures, and over-budgeted revenue, in some instances. As a result, fund balances have been drained to cover operation costs; while this has reduced what would otherwise be a higher property tax levy, balances are no longer sufficient to fund operations in the event of an emergency or unexpected loss of revenue. Additionally, the County is no longer able to meet those fund balance standards established by County policy and the Office of the State Auditor.
- The ongoing lawsuit with the Mille Lacs Band of Ojibwe. The Mille Lacs Band brought a suit against Mille Lacs County, County Sheriff, and County Attorney regarding revocation of the cooperative law enforcement agreement in 2016. In response, the County was forced to obtain outside counsel, spending approximately $7 million to-date on attorney’s fees. In 2020 alone this accounted for over 16% of the total levy. The 2021 expenses noted below are year-to-date; those expenses will increase as monthly invoices are paid.
- Increasing costs of operations. The volatile health care and employment markets have necessitated regular increases to both wages and health care premium contributions. In order to retain qualified staff and provide a high level of service, wages have increased each year to keep pace with the market; in some cases, the County is contractually obligated to make these increases. The recent exodus of both long and short-term staff to adjacent counties and private employers has only made the situation worse. Health care premiums have also increased dramatically year-over-year, outpacing inflation. This is in addition to all those other costs of operation that continue to increase, utilities, raw materials, automobiles, technology, etc.
- Increasing costs of out of home placement. In the last seven (7) years the cost of out of home placement, the court-ordered removal and placement of a child outside their parental home when it’s found that they’re in an unsafe environment, has doubled, from approximately $1.9 million in 2013, to $3.6 million in 2020. Approximately two-thirds of this cost is not reimbursed, and is therefore funded by the property tax levy. In 2020 alone out of home placement costs, after reimbursement, accounted for approximately 15% of the total property tax levy. The majority of these costs (approximately 60%) are associated with the Indian Child Welfare Act (ICWA), an act governing the placement of Native American children for which the County has limited control, but is ultimately responsible for meeting program objectives and paying associated costs.
After adoption of the preliminary levy on September 29, 2021 the County Board of Commissioners and staff will continue working to reduce expenditures and explore alternative revenue streams in an effort to reduce the levy before certification at the end of the year. A public meeting to discuss the budget will be held on December 7, 2021 at 7:00 pm. The 2022 budget and levy will be finalized on December 21, 2021.
While the budget and property tax levy are an important piece of the property tax puzzle, there are a number of other factors that influence the calculation of property taxes. One of the most important factors, at least for taxes payable to the County, is calculation of a net tax capacity rate. This rate is calculated by dividing the property tax levy by the total taxable net tax capacity of all properties in the county; what this means is that increases or decreases to the levy or taxable net tax capacity (based property values, classifications, etc.) can have an impact on the net tax capacity rate. The net tax capacity rate is what is ultimately multiplied by the taxable net tax capacity of each property to calculate those taxes due and payable to the County.
As noted on the graph below, the net tax capacity rate proposed for 2022 is approximately 84.5%, 2.5% lower than 87.5% high reached in 2013. Even though the property tax levy went down or stayed flat each year from 2010 to 2014, the net tax capacity rate went up each year. This is the result of property values (and taxable net tax capacity) decreasing over that same time period. In 2022, county-wide taxable net tax capacity increased, which is why the proposed net tax capacity rate increase is approximately 10% (instead of 24.5% like the property tax levy).
While the public will have an opportunity to provide input on the budget at the December 7, 2021 meeting, feedback provided before that date will be even more valuable as county staff and elected officials continue to work on finalizing the 2022 budget. If you have any questions, or would like to provide feedback, please use the contact information or form submittal field below.