Gov. Jesse Ventura’s finance commissioner once famously announced that the state had “a boatload of money.”
The big debate then was who got the most new money. Since then, state finance officials have looked under every financial cushion for all the spare change they could find, changing the debate to who would lose money. In city leaders’ opinions, those funds — and they say it has not been pocket change — too often came from their coffers.
During Republican Gov. Tim Pawlenty’s time in office, state aid payments to cities were raided time and again so the state could balance its budget. Now, with Mark Dayton poised to become governor and the state facing a $6.2 billion deficit, leaders mix optimism with fear that the raids could continue.
Dayton is a strong Local Government Aid supporter, but even the liberal Democrat says the state must find places to cut in order to balance the budget.
City aid, commonly known as LGA, was established because some communities could not collect enough property taxes to support fundamental services such as public safety and street programs.
LGA uses a complex formula to divide state aid among cities, with rural cities, Duluth, Minneapolis and St. Paul getting the lion’s share.
Supporters argue state aid is essential for cities.
Park Rapids Mayor Nancy Carroll, for instance, said that LGA provides $400,000 of her city’s $2.5 million. That is just more than half of the LGA Park Rapids got when Pawlenty took office in 2003.
Carroll said she is in one of the property-poor communities that need LGA, with low-income residents and older houses making it impossible to raise enough funds via property taxes..
For many LGA supporters, Pawlenty has been seen as the enemy since he has unilaterally cut aid and worked with lawmakers to trim it.
But in an interview before he leaves office on Jan. 3, the governor said some cities get more LGA than they need. And some, he added, improperly blame property tax increases on LGA cuts.
In Duluth, for instance, property taxes “skyrocketed” well beyond what it lost in LGA, Pawlenty said. “They have spending commitments that far exceed any increase in revenues.”
The Duluth problem, he said, mostly is to fund retirement plans that he considers too rich. That type of situation drives up property taxes more than LGA cuts, he said, in Duluth and other cities.
Early in Pawlenty’s eight-year tenure, the LGA formula was altered to return closer to the original help-the-poor-cities idea, but the change was not big enough for some.
Pawlenty’s answer is for cities to do a better job of watching their budgets.
“It’s OK for cities and counties to reduce spending,” he said.
Carroll, Coalition of Greater Minnesota Cities president, said that has been done.
“We just are very lean,” Carroll said. “They still are plowing the roads, but I just think our city would be in very bad shape if we sustained another cut.”
Regardless of state fiscal problems, Carroll and Worthington Mayor Al Oberloh said in a recent opinion-page article that they are optimistic legislators and Dayton understand their dilemma.
“One of the reasons for our optimism is Gov.-elect Mark Dayton and his renewed emphasis on a strong local government partnership,” the mayors wrote. “The other lies in our newly elected Republican legislators.”
In an interview, Carroll said that even though Republicans tend to show less LGA support than Democrats, there are enough new lawmakers from rural communities that need LGA that they could make a difference.
The optimism comes from “looking at the sheer numbers of (Republican) legislators from outstate,” Carroll said.
Coalition members met with their legislators in December to drive home the point that LGA is vital. Carroll said she thinks lawmakers understand.
“I wish that local government aid made sense to everybody,” she said.