As Blue Earth and Nicollet counties set their preliminary tax levies this week at levels higher than in the recent past, the commissioners need to assess the significant risks of the national and local economies before settling on those relatively high rates of increase.
Blue Earth County set a preliminary levy that will increase by 6% while Nicollet County commissioners voted to approve a preliminary 5.25% increase. Counties can lower those levy amounts in final budgets but cannot raise them.
Last year, Nicollet County approved a 3.8% hike in its levy and Blue Earth County approved a 5.8% hike. The U.S. rate of inflation has been averaging about 1.7% per year.
Both counties point to significant increases in expenses, including an estimated $4.5 million bill to Nicollet County for health insurance claims, making up 10 percent of its total budget.
Blue Earth County says it needs the extra funding due to hiring five more staff members and paying health insurance costs that will increase by 10 percent. It will need another $1 million for new technology and equipment.
Both counties have healthy increases in their tax base with Blue Earth County increasing 4.7 percent and Nicollet County adding $111 million to its tax base. Blue Earth County will have a deficit budget and will also dip into its reserves.
Blue Earth County Administrator Bob Meyer said contingencies for a worst case scenarios and or a financial crisis are being built into the budget. That’s good to know.
There are plenty of risk factors in the national and local economy for the year ahead.
On the national front, the trade war with China continues to hurt overall economic growth, and most important to the Mankato area, crop prices. Prices have been down anywhere from 10 to 20 percent this year.
The largest export market for U.S. soybeans has disappeared and prices have reflected that. Before the trade war, China bought 39 million tons of soybeans from the U.S. For the year ended Sept. 5, they have purchased 13.4 million tons.
It’s no surprise farmland values are flat in Nicollet County and while they will increase in Blue Earth County, they have been down in recent years.
Auto sales in Mankato are only up about 1 percent this year at a time when personal income and wages have been on the rise as has Mankato area employment, increasing especially in the manufacturing sector.
So the soft auto sales may be the canary in the coal mine indicator for government to be cautious about robust spending and increasing taxes.
In the months ahead, we urge all local governments to go over those budgets with a fine tooth comb and consider the difference between needs and wants. Constituents may be taking hits in their pocketbooks from a risky economy.