The conservative Freedom Foundation of Minnesota, which espouses personal responsibility and limited government, adds more fodder to the debate about Local Government Aid with a report that calls for phasing out the state government program.

Gov. Tim Pawlenty took a step in that direction Tuesday when he cut $300 million in aid to cities and counties as part of his unallotment plan to balance the state budget.

The Freedom Foundation report says the current LGA plan was designed in 1971 "to take state tax dollars and allocate them to
cities to keep property taxes under control.  It is a redistributionist program that could more accurately be described as local government welfare.  Perhaps the most miraculous aspect of the so-called Minnesota Miracle is that the program has not yet bankrupted the state."

Annette Meeks, FFM chief executive, said:  “Once upon a time it was called the Minnesota miracle, but LGA has increasingly become the Minnesota migraine. Cities can’t count on it, the legislature can’t control it and taxpayers can’t afford it. LGA needs to be phased out in a responsible way, in addition to implementing other reforms in order to return fiscal control and accountability to local governments and taxpayers.”

The report argues that LGA is an unsustainable program that taxpayers can no longer afford and that reforms to LGA, whether incremental or sweeping, have been woefully insufficient.

In the ongoing debate in LGA, with metro and outstate mayors lambasting the governor's cuts, FFM also sent out these "fact check" statements:

• CLAIM: “Over the past six years, Minnesota cities have lost $750 million in local government aid, and as a result property taxes have increased over 65% statewide. This increase in property taxes, however, has fallen short of replacing the lost aid, so essential city services have also been cut back.” (Statement from the Coalition of Greater Minnesota Cities, 6-16-2009)
• FACT: Over the past six years, Minnesota cities’ budgeted general fund spending has increased from $2.2 billion to $3.1 billion, a 40% increase.  During that time, public safety spending increased 56% while street and highway spending saw a 44% boost.  Clearly, LGA reductions have done little to rein in local government spending.  And it’s not just essential services that cities are spending on.  “Culture and Recreation” spending, which includes services like parks and swimming pools, has increased every year since 2003.  In 2009 alone, Minnesota cities are budgeted to spend $464 million on culture and recreation services.  (Source: Office of the State Auditor’s city summary budget data, 2003-2009)

• CLAIM: “The effects of cutting aid from Minnesota communities are as predictable as a Minnesota winter – every year we see higher property taxes and cuts to critical services...  The governor’s cuts are wrong, and it’s time for state leaders – both Republicans and Democrats – to put their residents first and prioritize funding for safe, affordable communities.” (Statement from Wadena Mayor Wayne Wolden, 6-16-2009.)
• FACT: In 2004, the City of Wadena received per capita LGA of $219.28.  In 2008 and 2009 respectively, Wadena’s per capita LGA was $272.50 and $299.67.  Meanwhile, while warning of cuts to “critical services,” perhaps Wadena leaders should consider cutting a less-than-critical service that is costing their taxpayers: their municipal golf course, which is a perennial money loser.  Between 2003-2007 (years inclusive), the city-owned golf course in Wadena reported operating losses of more than $230,000.  (Sources: Office of the State Auditor’s enterprise fund data; State Demographic Center population estimates.)
  
• CLAIM: “Minnesota communities were critically hurt today by the governor’s action, and nearly every Minnesotan will personally be affected.  It could be in the form of no cop in their kid’s school, higher property taxes, or a local library that is no longer open.  Many Minnesotans will think in the coming year that this is not the state they knew, or the state they want it to be.” (Statement from St. Paul Mayor Chris Coleman, 6-16-2009.)
• FACT: 2.4 million Minnesotans, or 45% of the state’s population, currently reside in communities that receive absolutely no LGA.  In 2009, 92 cities with a combined population of nearly 1.4 million people, are slated to receive no LGA, not as a result of any budget cuts or unallotment but because they did not qualify for funding under the LGA formula.  In addition, the 980,000 residents of Minnesota townships also receive nothing from the LGA program.  And small cities (population <1000) have been spared of any LGA reductions, in recognition of the limited options for spending cuts in those cities.  (Source: Minnesota Demographic Center, 2007 population estimates.)