Local government aid — the state financial-assistance program known as LGA that serves about 85 percent of Minnesota’s cities — has been a sore subject at the Capitol for more than a decade.
Its tilt toward DFL-dominated big cities and exclusion of many Republican-leaning suburbs has made it a favorite GOP target for budget cuts. Its unreliability has pinched city budgets and foiled the best efforts of city officials to run orderly operations. Its complexity has invited suspicion that it goes to the wrong places for the wrong reasons, and that it fuels inappropriately high city spending.
Some of those complaints go with the LGA territory. They’re the questions that are bound to arise about any state effort to narrow the big variations that exist between Minnesota cities’ needs for public services and their capacities to pay for those services with local property taxes alone.
But a better distribution formula ought to go a long way toward satisfying LGA’s critics. One promising possibility emerged at the Capitol this week, backed by cities both large and small, metro and outstate.
It’s the handiwork of the nonpartisan policy wizards in House Research and the indirect byproduct of a bipartisan effort launched last year by Gov. Mark Dayton and led by Minneapolis Mayor R.T. Rybak and St. Cloud Mayor Dave Kleis.
Among the new formula’s virtues:
• It’s need-driven: Cities with the largest gap between calculated need and current LGA support would have first claim on additional LGA money. That hasn’t always been the case under current law.
• It’s size-sensitive: The old formula put cities into two categories — populations above and below 2,500. Grow or shrink a little, and a small city could face a big change in state support. The new approach creates small, medium and large city categories and a formulaic glide path from one category to another to ease transitions.
• It’s simpler: Gone are complex interlocking formula factors such as the number of traffic accidents per capita and population changes over the last 10 years. No need calculation has more than three factors.
• It’s more geographically balanced. Suburbs with large stocks of post-1940 housing fared poorly under the current program. The new formula would give them access to LGA, making it more truly a statewide program — and more likely to enjoy bipartisan backing.
Those proposed changes ought to appeal to legislators at any funding level. But they are easier to sell this year, as Dayton is proposing a rich $80 million boost in LGA in the coming state biennium. (That would bring LGA’s 2014-15 total to $507 million — still $80 million less than the amount appropriated but never delivered in 2003 and never seen since.)
The new formula would gradually shift the LGA balance away from big cities and toward older suburbs. Receiving a smaller slice of pie is more tolerable if the whole pie is growing.
Aiming to ensure that growth and to provide greater predictability, the proposed change includes one problematic feature. It would put future LGA appropriations on an automatic escalator driven by inflation, as existed before 2003. Legislators should be wary of taking this program’s reins out of the hands of their elected successors. One possible safeguard might be an automatic “off switch” on LGA increases when state budget forecasts predict a deficit.
LGA is often justified by its backers as property tax relief, and it indeed has that effect. But if it’s just help for overburdened homeowners that legislators seek, they’d do better to beef up the income-based Property Tax Refund or “circuit breaker” program rather than sending aid to city governments.
LGA serves a slightly different purpose. It’s the state’s effort to invite investment and renewal in the state’s older cities, both big and small. It helps keeps taxes affordable in places as far-flung as Roseau, Worthington and Minneapolis for properties other than homes. It keeps the quality of public services acceptable in places where existing tax bases are weak. That in turn boosts the quality of life for all Minnesotans.
Dayton’s proposed $80 million LGA increase this year strikes us as a bigger stretch than the Legislature needs to make. But with the proposed formula change, at least it’s a stretch in the right direction.