2003-01-22 CC Packet - Laserfiche WebLink

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Page 1 .of 2 Kim From: O'Rourke, Jennifer [JORourke@LMNC.ORG] Sent: Monday, January 13, 200311:17 AM To: General legislative Subject: [legislative] Rumors of a possible 2002 Aid Cut? Rumors of a possible 2002 Aid Cut? On Tuesday, Governor Pawlenty and Department of Finance Commissioner Dan McElroy will unveil their proposal to balance the state's short-term $356 million budget deficit. Rumors about the content of their proposal have generally focused on additional state agency cuts, tapping money set aside by earlier legislatures for road projects and redirecting revenue available in other state funds. Late last week, an additional rumor began circulating that involves city aid payments. Although to our knowledge, aids paid this past December cannot be directly recalled by the state, we have heard that the state may try to recover some of the 2002 aid by asking cities and counties to return it. How would it work? The cut would actually be computed for the next LGA payment due in July and the market value homestead credit payment due in October. These 2003 city aid payments come out of the state's 2004 fiscal year and would not help balance the short-term deficit. However, to accelerate the receipt of the aid cut, the state would give cities a choice to take the July/October cut or allow the city to repay a lesser amount before the end of the state's fiscal year on June 30. We do not know how much savings a city would be granted if they decide to repay the cut early, but a 5 or 10 percent "savings" might be a possibility. Of course, accelerating the cut in this manner would not directly help the state with its long-term deficit and there is no guarantee that the legislature would not make a second cut in the aids scheduled to be paid in 2003. However, the state has relatively little time to address the short-term deficit and this approach might help solve the state's immediate problem. If such a proposal is unveiled on Tuesday, city officials should carefully evaluate their options. As mentioned above, there is no guarantee that the short-term deficit response will be the only cut in 2003 state aids. Ironically, those cities with the least amount of reserves and therefore the least ability to cope with aid cuts would be the ones least likely to afford the "benefit" of paying the aid cut back early and would therefore have a relatively larger aid cut in July. Stay tuned and watch for the announcement of the Governor's short-term deficit plan on Tuesday. You are currently subscribed to legislative as: ksykes@centervillemn.com To unsubscribe send a blank email to leave-Iegislative-4450H@listserv.lmnc.org This email has been scanned for all viruses by the MessageLabs SkyScan service. For more information on a proactive anti-virus service working around the clock, around the globe, visit http://www.messagelabs.com You are currently subscribed to legislative as: ksykes@centervillemn.com To unsubscribe send a blank email to leave-legislative-4450H@listserv.lmnc.org This email has been scanned for all viruses by the MessageLabs SkyScan service. For more information on a proactive anti-virus service working around the clock, around the globe, visit http://www.messagelabs.com 1/13/2003