2002-08-26 CC Worksession - Laserfiche WebLink

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. , I . Other Factors Cuts yet this year? Although most of the current focus on the state budget is on the 2004-05 biennium, there is still an outside chance that the 2002 December distributions of LGA and the MVHC reimbursement could occur IF the November 2002 state budget forecast shows a state deficit by the end of the current biennium that exceeds the current $300 million state rainy day fund and IF the governor decides to address the deficit through unallotment. Through "unallotment," the governor effectively has the power to reduce legislative appropriations to address a state deficit that exceeds its reserves. Given that the state's biennium ends on June 30, 2003, the December 2002 LGA and MVHC payments would be the last distributions to cities this biennium. LOA reform. Reform of the LGA system may be a topic of legislative focus during the upcoming session. The current formula uses statistical data from the decennial U.S. Census that has now been compiled and released. The Department of Revenue initially used one updated statistic from the 2000 Census to compute the 2003 LGA distribution. The use of that statistic produced large, unexpected variations in the distribution of state aids and, upon review, the Census data appeared to have unexplainable results. Essentially, the department will use the existing 1990 data for one more year. At a minimum, the Legislature will likely have to address this piece of the LGA formula during the 2003 legislative session. We also know that some legislators have indicated an interest in a total review of the formula and the funding level---especially given the State's current fiscal predicament. This could lead to an extensive effort to reform the system. However, unlike possible cuts to balance the state's budget, which could be implemented irmnediately, any reform of the system would not likely be effective until 2004. Other property tax pressures Many school districts across the state are struggling to address their own financial needs. The state takeover of the majority of school funding coupled with the state's financial troubles means that schools will not likely find sufficient new state resources. Many school districts have already announced they are "going to the voters" to approve new or expanded operating referendum levies. This will place pressure on taxpayers and may result in less acceptance of city tax increases. Likewise, the state could tap its property tax as a potential way to address its budget problem. Although the nearly $600 million state property tax levy is automatically indexed for inflation each year, the state could decide to raise its levy even further to balance the budget. Again, this could place pressure on commercial, industrial, and cabin taxpayers and make city tax increases more difficult. Additionally, the state could expand the base of the state property tax to include homesteads and other additional types of property. <