Twin Cities are banking on getting full state aid

When Mayor R.T. Rybak crafted his 2011 Minneapolis budget, he built it on the proposition that the city will get its full dose of state aid, which hasn't happened in the past three years. So did St. Paul Mayor Chris Coleman.

Is that a prudent strategy when the state faces a $6 billion budget gap?

Some suburban city managers are building none or only a fraction of their allotted state aid into their budgets. In Minnetonka, City Manager John Gunyou says he's counting on none of about $500,000 in a homestead-credit aid that the state has paid his city in the past.

"We assume we're not going to get it," Gunyou said. "We kind of treat it as a windfall -- if any of it comes, then we're using it for onetime things, not planning on it."

Ditto for Brooklyn Park, which is due $400,000. "We are simply assuming that it won't be there, which I think is the safe assumption," said City Manager Jamie Verbrugge.

So why are two big-city mayors budgeting the full amount of local government aid (LGA) and the homestead credit?

Political strategy may play a role. The mayors appear to be putting heat on the Legislature not to balance state books on the backs of cities.

But if the Legislature cuts aid to the $64.4 million that Minneapolis received this year, Rybak's proposed budget will have a gap of $23 million. And given the size of the state's deficit, getting even the same amount next year could be difficult.

"If the state again breaks its promise to Minneapolis and the other cities, we have multiple scenarios," Rybak said in an interview last week.

So far, Rybak has outlined only one area where he would scale back if the aid doesn't come through. That's in street paving, where he would need to scrap a proposed $9 million expansion. The mayor had cited street paving as a priority because roadwork had taken a back seat in recent years to beefing up public safety ranks that had taken a hit from cuts earlier in the decade.

Debate in St. Paul

St. Paul's state aid allocation for 2011 is $62.2 million, up $10 million from this year. Coleman counts on the full amount as he proposes his first budget without a tax increase, after previous budget plans that raised the levy by 6 to 15 percent.

"I'm not sure what makes us think we're magically going to get it all this year," said Council President Kathy Lantry. "I get where the mayor's coming from, but in the end I have a disagreement with it."

Lantry said a 2 percent levy increase, about $1.9 million, had been discussed among council members, with strict conditions on how the money would be used if the LGA was or was not cut. The way the budget is proposed now, she said, there's no savings or wiggle room if any LGA is cut.

Still, it's likely Coleman will get his no-tax-increase approach when the council votes Wednesday on the maximum 2011 levy because there aren't enough council members to override a veto on an increase. In Minneapolis, the Board of Estimate and Taxation votes this week on Rybak's proposed 7.5 percent levy hike.

Political capital

One political benefit in building a budget based on a full allotment of aid is that mayors can make the state the heavy if cuts are needed, rather than taking the impetus for layoffs and other budget fallout by themselves.

A city's ability to withstand LGA cuts depends on how much it relies on the aid. Twenty-five cities, most of them small enough that most Minnesotans haven't heard of them, got more than half their total revenues from such aid in 2008, according to League of Minnesota Cities calculations.

Another 336 cities got at least one-quarter of their budgets from that aid. In contrast, Minneapolis received less than 9 percent of its budget from that aid in 2008, while St. Paul got more than 11 percent.

Cities less reliant than that on state aid will likely defer capital spending such as road resurfacing or a sewer project if the aid doesn't arrive, according to Gary Carlson, a league lobbyist.

He said cities are in a bind because they must set levies for 2011 before knowing how much aid they'll get, and those theoretically slated for aid increases under the law get offsetting cuts in their levy limits, even if the full aid never arrives.