Lawmakers hear PILT report as counties and legislators raise concerns about lost tax base from state land acquisition

The Senate Taxes Committee on Jan. 16 received an update on Payments In Lieu of Taxes (PILT) from the Department of Revenue and the Department of Natural Resources and heard senators warn that rising state land ownership is eroding local tax bases.

Kirsten Larson, Strategic Land Asset Management supervisor at the DNR, and Kelly Yitzke of the Department of Revenue presented an overview of eligibility, classes of PILT land and recent legislative changes. Larson said state PILT covers fee‑title DNR lands, federal LUP (land utilization project) leases administered by the department, MnDOT transportation wetlands and the Camp Ripley game refuge administered by the Department of Military Affairs. The state owns roughly 5.6 million of Minnesota’s 55.6 million acres; ownership concentration is geographically uneven and highest in northern and northeastern counties.

Yitzke said fiscal 2025 PILT payments totaled $48.1 million for roughly 8.5 million PILT-eligible acres and that payments are made annually on July 20 and distributed by county to taxing jurisdictions per the statute. Recent statutory changes from the 2023 legislative session include a per-acre rate increase for certain classes of land (for example, tax-forfeited and DNR-administered other natural resources lands rose from $2 to $3 per acre) and the creation of supplemental per-acre payments for counties with high PILT acreage shares. Under the supplemental rule, counties with PILT acreage equal to 25% or more of county acres received an additional $0.18 per acre (12 counties met that threshold in the most recent payment, producing about $1.2 million extra). Counties with 10–25% PILT acreage received $0.08 per acre (9 counties met that threshold, about $72,000 extra).

Yitzke said the 2023 law also prevents appraised PILT values from falling below their 2022 appraised values (the next required reappraisal for affected exempt lands is 2028, which will affect payments starting with the reappraisal cycle thereafter). The law allows the Department of Revenue to apply an annual cost‑of‑living adjustment to payment amounts; staff estimated that the first automatic adjustment for fiscal 2026 will add roughly $630,000 statewide (preliminary).

Yitzke explained the distribution mechanics: the DNR certifies acreage and classes to the Department of Revenue, which reviews the certification and makes a countywide payment on July 20; counties then distribute funds to townships, cities and schools within 30 days according to statutory formulas. Certain parks (notably Lake Vermilion–Soudan Underground Mine State Park) have distinct statutory payment formulas — for the Lake Vermilion Soudan park the FY2025 payment reported in the packet was $481,000 (the statute for that park sets payment differently, based on a percent of appraised value rather than the per‑acre rules used elsewhere).

Several senators used the hearing to warn that continued state purchases of land and conservation funding can shift privately taxable acreage into state ownership, shrinking local tax capacity. Senator remarks cited concerns about county road funding and broader local fiscal impacts where state ownership is concentrated; some members suggested the Legislature consider different treatment for land purchased with state conservation funds or revisiting how PILT is calculated and distributed.

Ending: Department staff said they will provide follow-up material — including distribution detail for specific parks on request — and committee members signaled interest in continued oversight of PILT trends and the fiscal impacts of state land acquisition.