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Minnesota mayors say LGA changes finally will bring budget stability

MinnPost file photo by Terry Gydesen
Minneapolis Mayor R.T. Rybak: “They delivered.”

It’s been more than a dozen years since there have been so many happy Minnesota mayors gathered together in one room.

But here they were Tuesday, eight of the 15 mayors who served on a special advisory committee, laughing together and saying highly complimentary things about Gov. Mark Dayton, Revenue Commissioner Myron Frans and the Legislature.

“They delivered” is how Minneapolis Mayor R.T. Rybak put it.

What was delivered was an increase in Local Government Aid, which had been a favorite target of budget cuts when Gov. Tim Pawlenty was running things. Also delivered was a vastly different relationship between the state and local governments.

But start with the cash, because without it, the mayors probably wouldn’t have been saying such nice things about the Dayton administration and the Legislature.

An increase of $130 million came out of this legislative session, with $80 million earmarked for cities (LGA), another $40 million for counties (County Program Aid) and still another $10 million for township aid. 

Additionally, the Legislature approved sales tax exemptions for local units of governments. Those units of government will not have to pay sales taxes on their purchases, which should amount to a savings of $172 million.

Property tax relief

All of these changes will help fund essential city services and is supposed to result in property tax relief — a fundamental promise of DFLers campaigning for legislative seats.

Toward that end, the Legislature also restored the homestead property-tax program and designated more funds for a program providing property tax relief to renters.

But Tuesday’s gathering — staged for the media — was mostly to celebrate the return of LGA to good graces.

Even with the infusion of money from the state’s general fund, local aid hasn’t returned to its high-water mark of 2002.

In that year, for example, Minneapolis received $118 million in LGA funding from the state. At its low point, that number had fallen, in the last budget under Pawlenty, to $64 million.  With the new funds, Minneapolis will now receive $76 million.

Almost as important as the money, the smiling mayors were saying, is that under a new LGA formula and with the current administration, there will be some stability to the program.

For the moment at least, there should also be a pause in the rise of property taxes, according to mayors from across the state.

DFLers long bristled over the claims of Pawlenty and GOP legislators that they were able to govern without raising taxes. Over and over, DFLers tried, with varying degrees of success to point out that as state government was making cuts, property taxes across Minnesota were skyrocketing.

The most conservative GOP legislators argued then – and now – that it is the responsibility of local governments to act as prudently as they were at the state level.

Already good stewards

But mayors of all political persuasions from all sizes of towns and cities were trying to tell the Pawlenty administration that they already were being good stewards.

What may have been the most difficult aspect of the relationship between the Pawlenty administration and local governments was the simple reality that the locals could no longer budget with any great degree of certainty.

For example, Rochester Mayor Ardell Brede pointed out that his city would “set” its budget, the state would face a shortfall and Pawlenty would “unallot” more money from LGA.

“We’d be tearing our hair out trying to figure out what was going to happen next,” Brede said. “It seemed like every time the state had a problem, they’d shift it to the backs of the mayors.”

Brede, who was among the 15 mayors in the advisory group selected by the administration, will see Rochester’s LGA funding grow from $3.5 million to $5 million.

Of course, not all cities and towns are winners. One of the criticisms of LGA is that not everybody gets a check.

However, mayors and Frans said Tuesday that the formula for distributing money has been upgraded — and more local governments than ever before will benefit from LGA. They also said that the new formula (PDF) is “more transparent” than the formula that’s been used since 1993.

Complicated formula

Transparency, of course, is in the eye of the beholder. There is a system for distributing LGA funds, but it’s neither simple nor what most would call transparent.

 There are two main components to the LGA program:

• First, each city’s need to provide “an average level of service” is determined.

• Then, each city’s ability to pay is factored.

Everything from property values to population density is factored into the formula. The formulas for cities with populations of fewer than 2,500 use slightly different data than those with up to 10,000 population.

 Still more data are pumped into figuring the aid status of the largest cities.

Again, the formulas are not simple.

For example, many older Twin Cities suburbs will benefit more under  the new formula because of a change in how housing properties are valued. In the 1993 formula, housing built before 1940 helped push up the “need’’ category of a city. The new formula now includes housing built between 1940 and 1970 (think places such as Richfield and Crystal).

What’s always most intriguing about LGA is how much it matters in rural communities.

For example, Joyce Nyhus is mayor of Buffalo Lake, with a population of “733 top-notch people” (the mayor’s description).

Nyhus, who admits she leans Republican, was a little intimidated when she showed up for her first meeting with the mayor’s advisory group, which included the likes of big-city guys like Rybak and St. Paul Mayor Chris Coleman.

“But everybody treated everybody else equally,” she said, “and I realized that I was not just speaking for my town but all those other small towns across the state.”

She’s not sure how much her community will receive with the new LGA system, but she expects a slight bump from the $100,000 the city last received. That may not sound like much — until you discover that the entire city is run on a budget of about $500,000.

“We had a tough [city council] meeting this week because we had to come up with $5,000 to fix up two problems we have on Main Street,” she said. 

LGA means cash flow, which means a smooth Main Street in Buffalo Lake.

In St. Paul, Coleman says LGA means being able to “maintain” the number of police officers, the size of all fire department companies in the city and library and parks programs.

“We have stabilized,” Coleman said. “We can look at ways to innovate. You can’t do that in a crisis mode when all you’re doing is cutting, cutting, cutting. We’ve got a little breathing room.”

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Comments (3)

  1. Submitted by Mike Downing on 06/20/2013 - 06:17 pm.

    “Free Money” to spend

    The DFL has given “Free Money” to Minneapolis and St. Paul to spend on artistic street lights and artistic drinking fountains as payoff to the unions that elected them in 2012. Unfortunately, this is not “Free Money” to spend. Instead it is outright theft from the producers. Shame on the DFL for stealing more money from the private sector rather than creating a more efficient and productive state government, county government and city government!

  2. Submitted by Richard Callahan on 06/20/2013 - 08:43 pm.

    Only 130 million

    The state raises taxes by 2,000 million and only 130 million (6%) is used for LGA and 650 million to pay for the project shortfall. This leaves about 1,200 million and they didn’t even pay back what is owed the school system. Just where is all this new money going?

    I’m embarrassed to have considered myself a democrat at one time.

  3. Submitted by Todd Hintz on 06/21/2013 - 07:50 am.

    LGA

    No one is “stealing” money from the private sector. It takes a certain minimal amount of money to make society run. Under Pawlenty that cost was shifted from LGA to property taxes, all the while claiming he had reduced taxes.

    With LGA dropping like a rock, cities did what they could do reduce budgets by cutting services, laying off workers, and finding efficiencies at every turn. We reached the law of diminishing returns on that avenue and cut government to the bone. We’re at the point where roads aren’t getting repaired and more bridges than ever are rated as deficient. How many more 35Ws do people want to fall down before they stop crying about money being stolen from the private sector?

    Obviously some people will always complain about things such as public art. Personally, I would rather spend a couple of bucks for art than turn Minnesota into another drab Soviet era suburb of Moscow. It’s those unique elements that makes our state a delight to live in and visit, from fish restaurants in Bena to balls of twine in Darwin and drinking fountains in Minneapolis.

    Enough is enough! Stop with the crying, stop with the amateur hour approach to government, and let the big boys step in and get the job done.

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