2003-02-26 CC Packet - Laserfiche WebLink

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Governor's Budget Proposal: Deep Cuts for Cities Page 1 of3 League of Minnesota Cities Governor's Budget Proposal: Deep Cuts for Cities By Garv Carlson and Eric Willette Yesterday, Gov. Tim Pawlenty unveiled a proposed 2004-2005 state biennial budget that brings expenditures in line with revenues to address the projected state budget deficit. Cities are a huge share of the solution--comprising more than 10 percent of the entire state budget deficit of$4.2 billion. Other significant pieces of the governor's proposed budget fix include a redirection of approximately $1 billion in tobacco endowment resources, nearly $390 million in E-12 funding cuts, $358 million in higher education reductions, $818 million in health and human services cuts, and $138 million in criminal justice reductions. The impact of the proposal on cities is ugly. All told, cities across the state face a cut in state aids over the next two-year period of$435 million, or approximately 29 percent of the total state appropriation for local government aid (LGA) and the market value homestead credit over the biennium. On an annual basis, the cut for the calendar year 2003 aid distribution is $141 million, or 19 percent of the aids that were scheduled for payment under current law. The cut of2004 aids is $294 million or 39 percent of state aids that were scheduled to be paid under current law. The cuts to city LGA and market value homestead credit are such large percentages for a reason. The governor indicates in his budget documents that city aid reductions should be computed on a basis similar to state agencies-even though most of city revenues come from non-state sources. The permanent city cuts for 2004 and beyond are capped at 9.5 percent of total city revenues-not just city revenues received from the state. The proposed cuts, if enacted, would reduce the LGA appropriation to a level last seen in 1996. At that time, cities across the state received $347 million in LGA. Also at that time cities received $192 million in HACA-a general aid program that has since been eliminated. When the governor's proposed cuts for 2004 are fully implemented and coupled with the overall aid reforms enacted in 2001, cities will have permanently lost nearly $260 million a year in state aid in just three years. For city-specific information, download a spreadsheet detailing GQY..P3~lel.lty'scJtY3idcutprQPQsaJ (pdf document). How the cuts are computed The 2003 cut is equal to the lesser of 9.3 percent of revenue base (certified levy plus general state aids) or 5 percent of total city revenues (total governmental fund revenues, except for bond proceeds and local intergovernmental grants) for most cities over 1,000 population and 3.5 percent for cities under 1,000 population. Cities over 1,000 population whose three-year average levy plus aid increase is under 2 percent also qualify for the 3.5 percent cut. The 2004 aid cut is much more complicated. The state would compute a targeted reduction for each city equal to 9.5 percent oftotal city revenue for cities over 1,000 population. All smaller cities and those larger cities meeting the 2 percent levy plus aid threshold would have a targeted reduction equal to 8 percent of total city revenue. http://www.1mnc.org/mainllmcstoryl.cfrn 2/2612003