Minnesota mayors’ push to keep LGA funding puts rural GOP members and chamber groups on the spot

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.

Shrinking 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.

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Comments (8)

  1. Submitted by David Greene on 02/25/2011 - 08:57 am.

    I am sick and tired of Olson’s lies and misleading statements.

    “We’re open to a new and accountable local revenue source. Dos you have a need? Go to your city and propose a quarter-cent sales tax.”

    Sorry David, but cities can’t do that without legislative approval. This is a state issue.

    LGA is really about equity. Do we really want to see wealth concentration in cities equivalent to what we see for individuals? Republicans may regret what they’re asking for, because in a state with no LGA and local control of all locally-raised revenue, Minneapolis is going to thrive and everyone else will get the scraps.

  2. Submitted by andy on 02/25/2011 - 09:09 am.

    And we arrive at the point. 40 years ago Minnesota Republicans and Democrats, working together, created LGA in the first place? Why? Because the cost of modern roads, schools, and public amenities was too much for certain localities to bear- and that pooling those costs STATEWIDE brought those costs down for EVERYBODY. The IR’s from that era had the smarts to realize that critical investment in the state as a whole was better for everybody- and the result of that investment was a higher standard of living for everybody.

    All these new~style Republicans presently occupying the Legislature are a lot less, shall we say, public spirited, than their IR forebears. Do they have the insight to realize the “parasites” they would like to kick in the teeth are the very same people who can vote them right back out of office in 2012?

  3. Submitted by Paul Udstrand on 02/25/2011 - 10:24 am.

    It would be nice if the business community would finally wake up the fact that the state and national chambers have become Republican front organization that represent the party, not business. Republican policy is not business friendly, it’s wealthy friendly, there’s a big difference. Most business people are not wealthy, when we talk about the middle class, the distinction between employees and employer’s is a false distinction for the most part. Most business people are middle class, policies that promote the top 5% at the expense of everyone else are damaging to business and the economy.

    The stadium and the Mall of American are perfect examples of policies that promoted the interests of billionaires at the expense of local business. In both cases revenue has been captured from local business and used to send customers to someone elses business. Cuts in LGA, poor and expensive infrastructure, expensive private education, and downward pressure on wages and salaries, are all bad for the vast majority of business’s; yet all championed by the state and national chambers.

  4. Submitted by John Olson on 02/25/2011 - 10:36 am.

    Another reality that is overlooked are the hundreds of small Minnesota towns where the population has been increasingly aging and the number of families with school aged children are declining. Many of these towns used to have their own school districts in an earlier era and were forced into consolidation with nearby towns in the same situation.

    As the population ages in these small towns, an increasing percentage of residents are on fixed incomes and are not going to have the ability to pay higher property taxes–even if they wanted to. Essential personal services such as doctors, dentists, hospitals, etc. are increasingly concentrated in regional centers.

    Depending on how this all plays out, one has to wonder if some of the smallest towns scattered around the state will essentially cease to exist altogether.

  5. Submitted by Paul Scott on 02/25/2011 - 11:12 am.

    This reminds me of the turnaround in local chambers on bonding. I recently wrote an opinion column for the Rochester Post Bulletin lamenting the fact that our own senator, Dave Senjem (R-Rochester) is the committee head personally obstructing consideration of the bonding proposal for the expansion of the Mayo Civic Center, very likely out of adherence to the hysterical paroxysms of Tea Party sentiments. The expansion is needed to draw medical and scientific meetings from out of state, and is projected to create hundreds of permanent jobs and inject $44 million into the local economy. The head of our local chamber can be found on a website promoting the proposal, and yet now that the GOP is making symbolic gestures on not funding new bonding — it can’t be financial because the costs to the overall budget are nominal –he won’t voice an opinion about the obstruction within the GOP for bonding. I feel like the local chambers have so instinctively sided with the political right that now that the GOP is no longer acting in the best interest of local business the chambers can’t even see that they have been abandoned for national political ideology.

  6. Submitted by Paul Udstrand on 02/25/2011 - 12:13 pm.

    Of course I forgot to mention health care reform. No one needs a national health care system that would control costs, cover everyone, and get all business out of the health care business more than American businesses. Yet the chambers have all opposed any public options, or national plans.

  7. Submitted by Eric Ferguson on 02/25/2011 - 04:21 pm.

    Paul, “Republican policy is not business friendly, it’s wealthy friendly, there’s a big difference.”

    Though I don’t agree with you about the stadium, that is a great way of expressing it. There are a lot of middle class people fooled into thinking the interests of the wealthy are theirs too, and that upper income taxes somehow hurt the middle. The fact is taxes are the lowest they’ve ever been, but that’s due almost entirely to tax cuts at the top.

    Besides, even if someone thinks the wealthy pay a fair share already, only the top few percent have any money, so they’re the only place taxes can come from.

  8. Submitted by Dan Dorman on 03/09/2011 - 04:38 pm.

    “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.

    No wonder Mr. Olson wants to get rid of the program. He thinks the formula is 30 years old. Someone should point out to him that this is the Pawlenty LGA formula from 2003. But then, why bother letting the facts get in the way of a good argument!

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