Minnesota mayors and local officials were back at the Capitol this week, hoping to preserve what is left of Local Government Aid.
For the first time in eight years, the mayors do have a supporter in the governor’s office. In his controversial budget proposal, Gov. Mark Dayton holds LGA harmless, and mayors, represented by the Coalition of Greater Minnesota Cities, were singing the praises of that portion of the governor’s budget.
But mayors across the state still are faced with a huge sales job, the main task being to attempt to make the state’s taxpayers to understand that there is a direct correlation between the years of cuts to LGA and the subsequent cuts to city services and the resulting dramatic rises in property taxes over the same period.
“It shouldn’t be hard for people to understand,” said Marshall Hallock, finance director of Red Wing of the impact of LGA cuts during Tim Pawlenty’s two terms as governor. “We’ve gutted our library, made a 13 percent cut in the workforce, cut everywhere. Now, we have a winter with all this snow and we’re getting questions from people, ‘Why aren’t we doing a better job plowing the snow?’ “
State mayors have been lobbying rural Republican legislators and local chambers of commerce in an effort to preserve their slice of the LGA pie.
How big a pie was it? How big is it? There are no simple answers in dealing with government figures.
The mayors say that in Pawlenty’s two terms, when LGA took virtually annual cuts, property taxes rose by $3 billion in Minnesota, a 68 percent increase on property taxes paid to all level of governments. (Only a small portion of those property tax dollars ended up going to cities. The rest went to counties and other levels of government.)
Park Rapids Mayor Nancy Carroll, president of the Coalition of Greater Minnesota Cities, called this phenomenom “bait and switch.”
The mayors point out that state revenue department figures show that for every dollar cut in LGA, property taxes go up by 67 cents.
The total LGA numbers look like this: Using dollars adjusted for inflation, the state paid out $775 million in 2002. In 2010, the state paid $426 million.
It’s not totally clear what the Republican-controlled Legislature has in mind for LGA as it attempts to come up with a way to balance the budget with no new taxes.
In its first $1 billion budget-cutting effort, which was vetoed by the governor, Republicans claim they held LGA harmless. But even that’s misleading, according to the coalition mayors.
Republicans, in House File 130, used the 2010 LGA figure, $426 million, but that was a lower figure than called for by state formula. The coalition says the total used by Republicans is actually $100 million lower than what is owed to cities under the LGA formula.
And remember, even that Republican effort dealt with only a sixth of the overall budget deficit. The mayors are clearly concerned that if Republican hold to their “no new taxes” vows, they will have to take a bigger hunk of LGA funds. So they’re pressing rural Republicans especially hard to see the wisdom of preserving LGA.
How’s the lobbying going?
“I’ve spoken to some Republicans,” said Cloquet Mayor Bruce Ahlgren. “I think there is growing support.”
To date, that support seems pretty silent.
Split among chamber groups
Other mayors said that local chambers of commerce are breaking away from the state chamber organization’s generally anti-LGA position and pushing for the Legislature to make no more cuts to the 30-year-old aid program.
A civil war within the chamber over LGA?
“There have been a handful of chambers that have signed on with the Coalition of Cities,” said Dave Olson, president of the Minnesota Chamber of Commerce.
But Olson is quick to add that the state chamber has a more nuanced position on LGA from what it might have had in recent years.
“When we first were on the road with this, we did say that LGA ought to be eliminated in its current structure,” Olson said. “It’s a 30-year-old formula. It ought to be revisited. We have revised our statement to say LGA ought to be reformed, restructured and reduced.
“But we also said that we’re interested in an innovation fund that rewards a local government that comes up with creative streamlining. We’re open to a new and accountable local revenue source. Do you have a need? Go to your city and propose a quarter-cent sales tax. At least have that conversation.”
The mayors — and the governor — say they are mystified over the state chamber’s position.
LGA, they say, is business friendly. The property tax is not only regressive for homeowners but also is the biggest tax burden businesses in the state carry. According to state figures, property taxes amount to 36.2 percent of taxes collected from businesses. That’s five times more than individual income taxes on businesses.
So why does the state chamber hold its nose when it comes to LGA?
Chamber’s Olson touts accountability
Accountability, says Olson.
“Push the taxes to where people pay the most attention,” Olson said. “Truthfully, we assume that to get through this deficit, some of these cities and counties will raise their property taxes. We hope not. But we assume some will.”
Instead of raising any taxes, Olson says that the chamber believes local units of government can come up with more innovative ways to save money.
“We are seeing some cities doing things differently,” Olson said. “They’re sharing services with other cities, they’re coming up with other innovative approaches.”
But the mayors insist that innovations can’t keep up with community needs. They’ve cut employees, cut wages, cut services.
“We’ve done our part,” said Glencoe Mayor Randy Wilson. “We’re trying to live within our means, but there’s reality here. We have no more cuts to make.”
But even if there’s something close to accord among mayors, there’s not universal support for the governor’s budget-balancing approach. Some mayors, Cloquet’s Ahlgren said, would prefer to see an expansion of sales taxes, instead of the Dayton income tax proposal.
Where there does seem to be agreement among MOST mayors is that the state will need more revenue.
“With a $6 billion defict, there is no question of whether taxes will be going up,” said Park Rapids’ Carroll. “The question is: Which taxes?”
For too long, she said, the increase has come on property taxes.
So the coalition mayors are pressing hard at the Capitol, especially on those Republican legislators who represent small, rural communities.
But the state chamber is pressing hard on those same people to hold the “no new taxes” line.
“They are in a tough spot,” said the chamber’s Olson. “But I think most of them have figured out they were voted into office with the understanding they would not raise taxes. It’s not an easy job.”
Doug Grow writes about public affairs, state politics and other topics. He can be reached at dgrow [at] minnpost [dot] com.