The League of Minnesota Cities is starting to get the message; Local Government Aid is going to get reformed:
Sen. Claire Robling (R-Jordan), who chairs the Senate Finance Committee, introduced a bill on Jan. 18 that begins to address the state’s $6.2 billion deficit. The bill, SF 60, extends many of the unallotments that were ratified in 2010 as well as the supplemental budget cuts that were enacted in 2010. In total, the bill would apparently reduce the state’s general fund deficit by roughly $1 billion, including $200 million in unspecified reductions for the remaining five months of the state’s 2010-2011 biennium.
The bill appears to target several of the general fund appropriations that were fully or partially restored in the 2010 final budget reduction compromise.
As we pointed out last year, Local Government Aid – which started out as an attempt to help small, poor rural towns build critical infrastructure like roads and water treatment plants – has become a money-laundering scheme for large, DFL-controlled cities, enabling to shift their spending from their own property tax payers to the rest of the state – especially the parts of the state that pay full taxes, but receive no LGA (most of the state’s top-forty cities, mostly third-hier, GOP-leaning suburbs).
For cities, SF 60 includes cuts to both local government aid (LGA) and market value homestead credit (MVHC) reimbursements. The bill would permanently extend the calendar year 2010 supplemental cuts to MVHC reimbursements beginning with the scheduled MVHC reimbursements for 2011. The 2010 supplemental MVHC reimbursement cuts were originally enacted in Session Laws 2010, Chapter 215 and totaled $52.5 million, of which roughly $43 million was allocated to city MVHC reimbursements. Due to the fact that the 2010 supplemental budget cuts were first applied to each city’s MVHC reimbursement, these cuts impacted nearly every city.
Note that the 2010 supplemental budget bill already permanently extended about $25 million in MVHC credit reimbursement reductions to roughly 120 cities beginning in 2011. With the additional permanent reductions included in SF 60, virtually all of the MVHC reimbursement to cities would be permanently eliminated. No changes to the way the credits are administered were included in the bill meaning that homeowners would continue to receive the full value of the credit.
Of course, MVHC is a vehicle to reimburse cities with lots of low-value properties – Minneapolis, Saint Paul and Duluth – for having lots of low-value properties, notwithstanding the fact that most of the blight is caused by those same cities’ policies. MVHC rewards cities for policies that drive down home values!
The proposal would also permanently reduce LGA to cities by roughly $100 million beginning in 2011. The LGA cut for each city from the amount certified last July would be equal to roughly 91.5 percent of the total 2010 LGA cut under the 2010 ratified unallotment reductions and the 2010 supplemental budget reductions. For future years, the plan will permanently freeze the LGA appropriation at the $426 million level.
And that’s just the beginning:
In addition to the cuts specified above, the bill will impose yet-to-be-determined cuts on the budgets for the Legislature, the governor, the state auditor, the attorney general, and the secretary of state. The renters’ refund program will be reduced, and the political campaign refund will be eliminated. The Minnesota State Colleges and Universities system (MNSCU) and the University of Minnesota would lose $48 million and $45 million per year, respectively. Human service programs would lose roughly $32 million per year under the proposal.
As noted last week – and, indeed, constantly since about this past Labor Day, when Tom Emmer released his own budget – most of the “decreases” are in fact reductions to the forecast increase.
For the remainder of the current 2010-2011 biennium, the proposal requires the commissioner of Management and Budget to identify $200 million in general fund spending reductions to executive branch agencies.
And King Banaian’s HF2 will go farther, forcing agencies to justify their spending, and in some cases their existence.
It wouldn’t be the League of Cities if it didn’t pay homage to the DFL:
The proposal addresses only about 17 percent of the state’s $6.2 billion deficit. Legislative leaders will have to identify other much deeper cuts to balance the remaining state deficit. Even if the repayment of the $1.3 billion school payment shift is delayed, as many expect, the remaining deficit would be roughly $3.9 billion.
That is, of course, buncombe; the $3.9 billion figure is the amount of the forecast that will not be granted. But one can expect the LoC to repeat DFL talking points…
The mid-year cuts to city MVHC and LGA are particularly problematic. In December, cities set their 2011 budgets and property tax levies and they will not be able to adjust revenues to offset even a portion of these cuts until December 2011. Even then, any revenue adjustments would not be available until mid-2012.
The DFL’s party line is “this forces cities to raise their property taxes”. It’s rubbish, of course; it forces cities to find their own revenues for, or cut spending on, the parts of their budgets that LGA had been floating.
Of course city residents will prefer to have other people pay for their city budgets! Who wouldn’t?
But it’s time for local taxpayers to do one of three things:
- Be Happy To Pay For A Better Town, and quit your whining.
- Let your city council know that you’ve had enough, and you’re going to vote someone else into office if they don’t clean up the city’s fiscal house, using something other than cops, firemen and other essential services as cut-fodder. And then follow through on it. Just like the rest of the US and Minnesota did this past election.
Then you’ll see some changes.