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Rural Minnesota prepares for funding cuts
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The belltower at Concordia College in Moorhead. The mayor of Moorhead says the presences of Concordia and several other tax-exempt colleges and churches in his city means Moorhead relies more on Local Government Aid from the state. (MPR Photo/Bob Reha)
Rural Minnesota communities are bracing for a series of budget cuts. Of special interest is the Local Government Aid program. That aid is how some rural cities pay for basic services, like fire and police protection. As state lawmakers prepare to whittle down a multi-billion dollar deficit, out-state officials prepare to plead their case.

Moorhead, Minn. — Moorhead Mayor Mark Voxland says the Local Government Aid program is a vital source of income for cities with a limited tax base.

"We have three major colleges, we have quite an abundance of churches. All of those are not tax-paying entities," says Voxland. "Because of that, we tend to be property tax-poor in our city."

Voxland says that's an important factor in the formula used to determine Local Government Aid.

"How much tax exempt property you have versus the amount of property that's taxed in a particular city (affects the formula for aid)," says Voxland. "It has population factors in it, it has housing factors, and then there's a lot of other little pieces in it. It's a very complex formula."

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Image Scrambling to replace state funds

Local Government Aid developed in the 1970s to help tax-poor cities pay for basic public services. Voxland says Moorhead's budget contains a rainy day fund with $500,000, anticipating cuts in state aid. But officials will need to make even more cuts in the city's budget.

Gov. Tim Pawlenty visited northern Minnesota recently on what he called a listening tour. In the past few weeks the governor has used a variety of adjectives to describe the state's budget crisis. He says with a $4.5 billion state budget deficit, every program must be scrutinized.

"If you don't have tax base, if you don't have what it takes to provide for local police and fire services and the like, I understand that," said Pawlenty. "We should help you pay for that in a fair way. But these formulas have to be updated to reflect the modern realities of cities that have evolved and grown and changed for 20 or 30 years."

The governor says there are now some rural communities with the tax base to support their local services. But because the formula to determine aid has not been changed since 1992, they still receive state money. Pawlenty wants that changed.

Tim Flaherty of the Coalition of Greater Minnesota Cities says budget cuts are understandable. But he wants the cuts to affect rural and metro areas equally. Flaherty says if local government aid is cut, then metro communities should see a similar cut in funding.

"We're hearing rather distressing news,that the new administration is thinking in the line of about 40 percent cut in Local Government Aid," says Flaherty.

More than $586 million is budgeted this year for Local Government Aid. He says cutting that by 40 percent would jeopardize basic city services in some rural communities. He says the Coalition of Greater Minnesota Cities will lobby for a cut between 10 and 13 percent.

"Local Government Aid is about 4 percent of the state budget. But it's 40, 50, 60 percent of the money in the local city's budget," says Flaherty. "So you know they're (the Pawlenty administration) looking to solve a big problem at the state by taking four percent of the money that goes out to cities."

Flaherty understands cuts are coming. He wants to make sure no program is singled out, but he says a 40 percent cut is not fair and will hurt rural Minnesota the most.

Bemidji city manager David Minke says cuts in funds will have rural communities like his scrambling to replace Local Government Aid.

"Any significant decrease in LGA is going to have to cause us to significantly rethink how we deliver services, but also what services we deliver," says Minke.

Like many midwestern states, Minnesota's population base has shifted from rural areas to metro areas. The shift means fewer voices in the Legislature with a rural background.

State Rep. Morrie Lanning, R-Moorhead, is in his first term. Lanning served as Moorhead's mayor for more than 20 years. He says there are several new lawmakers with backgrounds in city government, and they will fight to make sure local government aid gets a fair shake. But he says people should realize changes are coming.

"And I think when all is said and done here in this session, we're probably going to see a rework of that formula," says Lanning. "And that will mean that some communities will probably get less aid then that have had in the past," he says.

Gov. Pawlenty is expected to announce his budget proposal for the next biennuim by Feb. 18.

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