The first in a series of state budget axes fell last week when Gov. Tim Pawlenty withheld $271 million in 2008 aid. Cities, counties, human services programs, higher education and other state agencies will receive less than what the state had promised in payments they are scheduled to receive today.
Under gubernatorial authority to "unallot'' funds to balance the state budget, Minnesota local government aid (LGA) took the biggest hit with a $110 million reduction -- $66 million to cities and $44 million to counties. That translates into cuts of $13.2 million for Minneapolis, $5.7 million for St. Paul, $10.5 for Hennepin County and $4.3 million for Ramsey County. Other cities and counties had payments withheld according to their size and budgets.
Generally, this first round of emergency cuts was handled well. Instead of imposing sledgehammer, across-the-board decreases, the governor outlined service priorities. Placing K-12 education and military and vets affairs among his top priorities, he held those areas harmless. Understanding the devastating impact reductions would have on some smaller units of government, the administration wisely exempted cities with populations under 1,000 and counties with fewer than 5,000 residents.
The governor withheld a portion of the December payments -- not the entire six-month installment -- making it somewhat easier for local governments to absorb.
And Pawlenty got off to a good start by meeting with legislative officials and leaders from affected agencies before making unallotment choices. Going forward, he should continue that kind of open communication. The $271 million cut is only the beginning, and during the 2009 session lawmakers must deal with a whopping projected $4-billion-plus deficit.
When setting LGA amounts, the governor must not forget one of his own funding priorities: public safety. The state cannot expect cities and counties to simply increase property taxes for those basic services. Experience and history tell us that excessive LGA cuts eventually force reduction in fire, police and other first responders. Minneapolis, for example, lost 100 cops because of a 30 percent state aid cut in 2003. It took three years to restore those positions.
As we've argued previously, to avoid those kinds of substantial cuts, the state may have to help arrange short-term borrowing for local governments or even give them temporary access to state cash flow.
According to city and county associations, many local governments were prepared for the $271 million unallotment and will muddle through with a combination of hiring freezes, budget reductions and use of surplus funds.
But to make it through the tough financial times ahead without gutting essential services, state lawmakers must continue to consult with their local government partners. They should study the detailed lists of burdensome state mandates produced by city and county organizations to find relief, savings and efficiencies. Working together, they can use these budget challenges to drive important reforms.