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After months of agonizing over his city's budget, Richfield City Manager Steven Devich braced for the worst when he sat down Tuesday to listen to Gov. Tim Pawlenty's plan to balance the state budget.
Instead, Devich got a surprise.
Pawlenty's January recommendation for a $522 million cut in local government aid (LGA) to cities and counties had dropped to a planned $300 million cut -- still bad, "but not as bad as I was anticipating," Devich said.
Now, like other cities and counties that seized on Pawlenty's initial announcement to cut spending, Richfield is in a position to mostly ride out state cuts this year. Next year, though, could be painful. Pawlenty's recommended 2010 cuts are twice as big as those for 2009.
Gary Carlson of the League of Minnesota Cities said cities now will have to decide whether to raise taxes to make up for lost state aid. They've already seen a rise in property tax delinquencies. That's true for counties, too.
"Do property taxes increase? Do services decrease? Or a combination of both?'' asked Washington County Administrator Jim Schug. His county will lose about $3 million of the $7.4 million it has received in LGA funding.
Mike Opat, chairman of the Hennepin County Board, said he is reluctant to raise property taxes. It's not wise policy to back up state services with property taxes, he said, and in this economy it's not popular either.
Minneapolis' 2009 city budget planned for an aid cut twice as big as the $8.5 million that Pawlenty recommended. But added cuts to city programs loom in 2010 because the city will absorb an extra $21 million in cuts -- still less than the $35 million it feared -- just as big jumps in pension costs hit from investment market losses.
Mayor R.T. Rybak said Minneapolis' budget cuts will help the city weather 2010 cuts. "If the governor would adopt some of the strategies Minneapolis is using, the state wouldn't be lurching crisis to crisis," said Rybak, a potential candidate for governor next year.
St. Paul now faces reductions of $5 million this year and $11.6 million in 2010; anticipated cuts were $7.7 million this year and $16 million in 2010. Mayor Chris Coleman said St. Paul residents should expect a reduction in library hours next year. Eight rec centers will probably close, and there will be layoffs. "It's an erosion of the things our community has come to depend on," he said.
St. Paul has cut about 130 vacant positions. In Richfield, 13 of 203 full-time jobs were cut this year, and salaries were frozen for a quarter. In St. Francis, City Manager Matt Hylen said his city's aid cut of about $100,000 will likely mean delays in replacing city equipment.
"You can only do that so long," he said.
Officials in Hennepin, Ramsey, Dakota, Scott and Anoka counties have had hiring freezes, layoffs and cuts in travel. They are also braced for state cuts in human services funding, the effect of which was still unclear on Tuesday.
Dakota County Administrator Brandt Richardson said the relationship between the state and counties is eroding. What's frustrating, he said, is that it doesn't lead to a long-term solution.
"Nobody should think this is the end of it," Richardson said. "I'm very worried this going to go on and on and on."
Staff writers Maria Elena Baca, Laurie Blake, Steve Brandt, Chris Havens, Jean Hopfensperger, Katie Humphrey, Paul Levy contributed to this report. Mary Jane Smetanka • 612-673-7380