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Cities hard hit by Pawlenty budget
by Michael Khoo, Minnesota Public Radio
February 19, 2003

DFLers say they would like time to pour over the details and present the plan to the public through a series of town hall meetings. Shown: House Minority Leader Matt Entenza, Senate Majority Leader John Hottinger, Sen. Ann Rest. (MPR Photo/Tom Scheck)

Local government officials across the state say they're concerned that Gov. Tim Pawlenty's budget proposals will lead to cuts in public safety or property tax increases or both. As part of Pawlenty's plan to erase a $4.2 billion deficit projected over the next two years, the governor has suggested cutting state aid to cities and counties. Administration officials say it's a simple matter of spreading the budget burden evenly.

St. Paul, Minn. — In the current fiscal period, the state has passed along nearly $3.4 billion dollars in property tax aids and credits. Most of that came as assistance to cities and counties, assistance meant to buy down local property taxes. And it's assistance that local officials say cities and counties have come to rely on. Governor Pawlenty's plan would trim the payments by roughly $625 million dollars. St. Cloud Mayor John Ellenbecker says that could prove disastrous.

"We could eliminate our parks department, we could eliminate our recreation department, and we'd still have to have dramatic impacts on public safety because our departments that are funded by this simply aren't that large. We don't have the fat that is assumed to be in these departments. If we eliminate them tomorrow, we'd still have to cut police officers and fire fighters; it's that simple," he said.

Ellenbecker says, too, that the cuts to local government aid hit the poorest cities hardest, leaving more affluent suburbs relative unshaken. That's in part because suburbs receive comparatively few LGA dollars.

Administration officials say they're surprised by the mayors' reactions. Pawlenty's plan caps the cuts at five percent of a city's budget in the first year and just under 10 percent in the year following. Counties have even lower caps. Moreover, Pawlenty says local governments have so far been spared from the state's budget woes.

"They haven't had one fiscal hair on their head touched in two years, at least from the standpoint of the state. And we're up here cutting budgets 10, 15, 20 percent. I don't think it's too much to ask for cities and counties to participate at the three or four or five percent of total revenue level," Pawlenty said.

But Minneapolis Mayor R. T. Rybak say cities have struggled mightily with fiscal shortfalls of their own. "I can tell you that not only touched a hair on my head, but it gave me plenty of gray hairs," he said.

Rybak says Minneapolis has already cut costs and consolidated services. And he says certain programs -- including public safety initiatives -- are too important to leave unfunded. Rybak says the question then becomes one of which tax should be raised to support local governments.

A massive LGA cut, I believe, is a decision to tax people out of their homes. - Minneapolis Mayor R.T. Rybak

"You want to pay it from your income or you want to pay it in your house? And I believe that changes that have been made to the state property tax in recent years have put an increasingly dramatic burden on the individual homeowner. And I think one of our largest concerns right now would be to make sure we're not taxing people out of their homes. And a massive LGA cut, I believe, is a decision to tax people out of their homes," Rybak said.

But cities may find it difficult to recover the loss in state aid through increased property taxes.

Revenue commissioner Dan Salamone says the administration hopes to impose limits that will restrict the ability of local governments to raise property tax levies. Salamone says the limits are meant to require discipline by local officials.

"I think and we're assuming they can find ways to do things more inexpensively. They can find ways to prioritize as we're doing in state government and come up with a 6.2 percent reduction. That's, by the way, the size of the reduction we in the Department of Revenue have to deal with," Salamone said.

Salamone says reforming local government aid is a work in progress. In addition to the aid reductions recommened for the next two years, he says administration officials are also working on plans to recast the way such dollars are distributed. Salamone says the new formulas will concentrate on what cities need rather than on what they've historically received.

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