The dollar amount of state aid to cities would be increased, and a distribution change would benefit cities with many jobs and modest property values.
State aid to cities would increase by $90 million under legislation that has won support from large and small communities as a way to reduce local property taxes on homeowners and businesses.
The biggest winners would be cities with more than 5,000 people that have a relatively high number of jobs but a low property tax base. Wealthier bedroom communities with less employment could see a decrease in the aid that they expected for 2009.
State aid to cities has been a major issue in Minnesota since cutbacks in 2003 effectively shifted more of the expense of local government onto property taxpayers or prompted cities to cut services. There are 854 cities eligible to receive the state aid.
"We know this solution is not perfect," Louis Jambois, executive director of the Association of Metropolitan Municipalities said at a legislative hearing Thursday. "But we think it's a very significant improvement."
The legislation sponsored by Sen. Rod Skoe, DFL-Clearbrook, seeks to restore cuts in local government aid while changing the method for distributing it. The $90 million represents a 19-percent increase from what had been expected. In future years the aid would be increased by between 2.5 percent and 5 percent annually for inflation.
The Coalition for Greater Minnesota Cities said that even with a $90 million increase, the state aid would still be well below the amount distributed in 2003, adjusted for inflation.
Filling a hole
DFLers have blamed Gov. Tim Pawlenty's pledge not to raise state taxes for increasing the burden on property taxpayers. Local governments across Minnesota lost state aid in the last legislative session when Pawlenty vetoed the 2007 tax bill, which included that money. He has advocated a cap on local property taxes as a way to provide relief to homeowners and businesses.
Jambois expressed concern that the aid could decline rather than rise because of a projected $935 million budget shortfall.
"We fear ... the governor's going to come out with projected cuts," he said. "When you've got a big hole in a budget to fill, the place that the hole fillers usually look to are the large pots of money. And [local government aid] is one of those."
Pawlenty spokesman Brian McClung declined to comment on the aid proposal.
While the major changes in Skoe's bill don't benefit all cities, they have the support of associations representing large and small cities, outstate and in the metro areas.
In determining how much state aid cities should receive, the bill uses jobs and tax base as proxies for the needs and wealth of cities with more than 5,000 people. The intent is to reduce swings in aid from year to year. In the past, the state used traffic accidents as a proxy for need, but a sharp decline in accidents could result in a drop in aid.
Smaller cities would get aid based on their population, with payments increasing from $6 to $12 per person.
The bill is likely to be considered as part of a broader measure dealing with property taxes.
Pat Doyle • 651-1210