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2002-08-26 CC Worksession
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2002-08-26 CC Worksession
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<br />. , I . <br /> <br />Other Factors <br /> <br />Cuts yet this year? <br />Although most of the current focus on the state budget is on the 2004-05 biennium, there is still <br />an outside chance that the 2002 December distributions of LGA and the MVHC reimbursement <br />could occur IF the November 2002 state budget forecast shows a state deficit by the end of the <br />current biennium that exceeds the current $300 million state rainy day fund and IF the governor <br />decides to address the deficit through unallotment. <br /> <br />Through "unallotment," the governor effectively has the power to reduce legislative <br />appropriations to address a state deficit that exceeds its reserves. Given that the state's biennium <br />ends on June 30, 2003, the December 2002 LGA and MVHC payments would be the last <br />distributions to cities this biennium. <br /> <br />LOA reform. <br />Reform of the LGA system may be a topic of legislative focus during the upcoming session. The <br />current formula uses statistical data from the decennial U.S. Census that has now been compiled <br />and released. The Department of Revenue initially used one updated statistic from the 2000 <br />Census to compute the 2003 LGA distribution. The use of that statistic produced large, <br />unexpected variations in the distribution of state aids and, upon review, the Census data appeared <br />to have unexplainable results. Essentially, the department will use the existing 1990 data for one <br />more year. <br /> <br />At a minimum, the Legislature will likely have to address this piece of the LGA formula during <br />the 2003 legislative session. We also know that some legislators have indicated an interest in a <br />total review of the formula and the funding level---especially given the State's current fiscal <br />predicament. This could lead to an extensive effort to reform the system. However, unlike <br />possible cuts to balance the state's budget, which could be implemented irmnediately, any reform <br />of the system would not likely be effective until 2004. <br /> <br />Other property tax pressures <br />Many school districts across the state are struggling to address their own financial needs. The <br />state takeover of the majority of school funding coupled with the state's financial troubles means <br />that schools will not likely find sufficient new state resources. Many school districts have already <br />announced they are "going to the voters" to approve new or expanded operating referendum <br />levies. This will place pressure on taxpayers and may result in less acceptance of city tax <br />increases. <br /> <br />Likewise, the state could tap its property tax as a potential way to address its budget problem. <br />Although the nearly $600 million state property tax levy is automatically indexed for inflation <br />each year, the state could decide to raise its levy even further to balance the budget. Again, this <br />could place pressure on commercial, industrial, and cabin taxpayers and make city tax increases <br />more difficult. Additionally, the state could expand the base of the state property tax to include <br />homesteads and other additional types of property. <br /> <br />< <br />
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