City leaders brace for big state cuts

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February 17, 2003 // UPDATED 4:40 pm - April 27, 2007
By: Hannah Clark
Hannah Clark

State subsidies pay for much of the city's police and fire service -- and could be a prime target for Gov. Pawlenty

When Governor Tim Pawlenty unveils his 2003-05 budget proposal next week, Minneapolis city leaders will be on the edge of their seats. The state -- saddled with a $5.5 billion projected deficit -- currently provides nearly a third of the city's general fund budget.

The state's subsidy is known as Local Government Aids, or LGA. LGA pays for $90 million of the city's $306 million general-fund budget. The program was devised to hold down property taxes in communities with high needs and less property wealth. City leaders say they depend upon it to fund police and fire services.

Gov. Pawlenty's office has not said how big cuts will be, and no one really knows, said State Rep. Margaret Anderson Kelliher, a DFLer who represents Downtown and Southwest Minneapolis. She said she's heard talk of cuts as high as 50 and 75 percent, but cautioned, "These are really people throwing numbers out, walking around the halls."

A spokesperson for Gov. Pawlenty did not return calls seeking comment. However, last week, state auditor Pat Awada -- like Pawlenty, an Eagan Republican -- recommended a 42 percent statewide cut in the program. That would cost Minneapolis $47 million next year -- about 15 percent of its general-fund budget.

How important is LGA? The city, parks and libraries received $112 million in LGA this year. A 42 percent cut would represent almost half of Minneapolis' 2003 police budget. Looked at another way, it is also the cost of every city department except police, fire and public works and debt repayment.

Awada's proposed cut would be four times bigger than the five-year $55 million spending-cut plan passed by the City Council last month. That plan would cap city employee raises at 2 percent -- cost-of-living at current inflation rates -- through 2008. The police department would receive 10 percent less than what it spends to provide current services.

That plan did not include LGA cuts.

It is unlikely that Minneapolis could raise taxes enough to recover lost LGA. That's because the mayor and council have already pledged to raise the property tax levy 8 percent per year, to forestall bigger spending cuts in the five-year plan.

A promise broken? During the election, candidate Pawlenty promised not to cut LGA, according to Kelliher and DFL Councilmember Scott Benson (11th Ward). But the Republican governor wants to keep K-12 education funding intact, which does not leave much room to maneuver amid the state's mammoth deficit.

"We've heard various stories within the administration that they have nowhere else to go," said Benson, who chairs the council's Intergovernmental Relations Committee.

The governor's budget is due Tuesday, Feb. 18. House and Senate committees will then address different parts of the spending plan. LGA will go to the House Tax Committee, chaired by Republican State Rep. Ron Abrams of Minnetonka.

"If the rumors are correct, there's going to be a restructuring of all the intergovernmental transfer programs" such as LGA, Abrams said. "I'm just going to wait to see what the governor's proposal contains, and we'll work with it."

Affecting regional safety Police, fire and public works consume about 60 percent of property taxes, so the city would probably have to cut police, firefighters, equipment or training, said Minneapolis Fire Chief Rocco Forte.

Forte is also the city's head of emergency preparedness. He said cuts would affect the entire metro area, because Minneapolis police and firefighters -- including the bomb squad and hazardous materials team -- are often dispatched far beyond the city limits.

"If we have less fire stations, firefighters or fire rigs, that's going to lessen our response time, and that's not something we want to see happen," Forte said.

It is starting to seem inevitable, however. St. Paul is making plans to cut $13.3 million from its general fund in anticipation of LGA cuts.

Minneapolis envy? LGA is not a partisan issue, said Andrea Hart-Kajer, the city's chief lobbyist, because cities across the state depend on it.

But Kelliher said some people close to the governor do not like that Minneapolis receives so much money.

Minneapolis's $112 million is about one-fifth of the total LGA pot. But LGA is a much higher share of municipal budgets outstate, regularly accounting for 60 to 70 percent of general funds.

Southwest Minneapolis DFL State Rep. Frank Hornstein said that urban areas tend to need more services, so they have more to lose when it's time to trim spending.

"I think there's a strong sense that we'll be balancing the budget on the backs of people who can least afford it," he said.

LGA distributes funds to cities that do not have a large property tax base. The formula is "need minus tax capacity." More pre-1940 housing and declining population usually mean higher need.

Cities with high populations generally require more funding, partly because people in nearby towns use, but do not always pay for, the population center's services.

The formula doesn't solely determine funding levels. For example, Minneapolis and St. Paul LGA is capped; otherwise, there would be too little left over for other cities. Some cities receive more than they should, because they have been allowed to maintain pre-1991 LGA levels.

Officials such as Benson and Hart-Kajer have been lobbying the legislature on Minneapolis' behalf, playing a popular card.

"All we can do is explain how important it is to provide cops, provide firefighters to be the first line of defense on terrorism," Benson said.