City of Red Wing

Governor Pawlenty's Budget Proposal Eliminates Local Government Aid to Red Wing

Wednesday, March 31 2010 12:00 AM

Negatively Impacting Your Property Taxes and Public Services

 
In February, Governor Pawlenty unveiled his supplemental budget proposal to resolve the state’s $1 billion budget deficit. The  Governor’s proposal disproportionately directs cuts to property tax relief programs including the Local Government Aid (LGA) and Market Value Homestead Credit  (MVHC)  programs,  which  will  negatively  impact  property  taxes and public services. The Governor’s proposal to further reduce LGA and MVHC are of such magnitude that they could devastate rural Minnesota, cause deep reductions in basic services, increase property taxes and further harm our community’s fragile economy.
 
What is LGA and Why is it Important to Me?

Simply  stated,  LGA  helps  keep  the  property  taxes  we  pay  affordable. Without LGA, property taxes will increase significantly, public services will be reduced or eliminated, or a combination of both. LGA is a state revenue sharing program enacted as part of the “Minnesota Miracle of 1971.” The Minnesota Miracle of 1971 reform laws arose from public discontent with soaring property taxes and the differences in the quality of public services, including education, between property tax-rich and property tax-poor communities. 

The  LGA  program  provides  direct  state  funding  to  support  public services  while  keeping  property  taxes  affordable.  LGA was established as a method, and has a long history of providing fairness in property taxation across the state. The underlying philosophy of the LGA program is that no matter  what  corner  of  the  state,  no  matter  how  poor  a  city’s  property  tax base, and no matter how high a city’s need, all cities and towns have a right to equitable, affordable and quality public services. 

Cities pay for services through a combination of property tax revenues and state LGA payments. LGA is designed to aid cities with the lowest tax bases and highest needs. LGA is distributed to cities based on a formula that identifies a city’s need versus its ability to raise sufficient revenues. Some cities do not receive LGA because of higher property tax wealth or lower needs than other cities and can raise enough revenues to cover the cost of services while maintaining a fair tax rate.

The Governor’s Unallotments and Supplemental 2010 Budget Proposal’s Impact on LGA and your Property Taxes

LGA and the MVHC programs provide state funding to Red Wing to support public services while keeping property taxes affordable. Cities, as recipients of state funding, have agreed to assist with the solution to the state’s fiscal crisis. However, cuts to LGA, which represent 2 percent of the state’s budget, reflect 16 percent of the state’s budget solution.

The Governor’s 2010 unallotment and supplemental budget proposal will eliminate Red Wing’s 2010 LGA of $1,518,176 and MVHC of $487,864, resulting in a 2010 revenue reduction of $2,006,040. This proposed reduction is the equivalent of a 14.15 percent decrease in the city’s 2010 revenue base. Prior to the Governor’s proposal to further reduce LGA and MVHC, the city of Red Wing had already reduced expenditures by 8.45 percent. These reductions impacted public safety, snow removal, street maintenance, after-school programs, park and recreation programs, pool hours, civic engagement programs, charitable giving and more. Critical capital equipment purchases and capital improvement projects have also been delayed. 

Credible  individuals  agree  that  when  LGA  is  reduced,  tax  fairness  is harmed. According to Council Administrator Kay Kuhlmann, “It’s better to address the state’s fiscal crisis through a fair approach. Elimination of LGA and MVHC is not fair and simply transfers the state budget crisis to cities.”

Nobody  likes  to  pay  taxes,  but  cuts  to  LGA  will  affect  some  of  the state’s hardest pressed communities while not affecting other state programs or  more  affluent  communities.  The  following  table  illustrates  that  LGA reductions  tend  to  disproportionately  affect  Greater  Minnesota  cities,  like Red Wing,  which  see  an  increase  in  property  taxes  and  reduction  in    services, while many Twin Cities suburbs are exempted from the property tax increases and reductions.

Cities, schools and counties have done their best to cope with aid cuts made during the state’s perpetual budget crisis. The state cuts to LGA have proven to be a losing proposition for local property taxpayers.  Kuhlmann said,  “In  a  nutshell,  citizens  in  many  communities  have  had  to  deal  with reduced services while being asked to provide more in property tax dollars.”                

According  to  Finance  Director  Marshall  Hallock,  “The  state  should  begin  to  pursue  a  new  direction  to  solve Minnesota’s  perpetual  cycle of  one  fiscal  crisis  after  the  other.  It  should  start  by  restoring  the  disproportional  unallotments  to  2010  LGA  and  MVHC  programs  that  pro-vide  equity  in  property  taxes  across  the  entire  state.  The  Governor’s  proposal  to  further  reduce  the  LGA  program  and  MVHC  program  in  2010 by  an  additional  $125  million  above  the  already  unalloted  $128  million  is  a  non-starter. A fair, stable and sustainable revenue system is needed.”  

The state legislature must work together to develop a fair, stable and sustainable future for Minnesota. In order to do this, all levels of government – the state, counties, cities and school districts – need to partner together to address the state’s economic problems in a manner that strengthens, not weakens, Minnesota by being:    

 

  • ·         Fair. Every resident, regardless of geographic location, deserves access to quality governmental services at an affordable level compared to their ability to pay.
  • ·         Stable. Minnesota’s fiscal rollercoaster ride will not stabilize until it includes predictability in taxation for its taxpayers and reliability in its revenue sources.
  • ·         Sustainability. A lasting, sustainable revenue source is needed to carry the state through today’s fiscal crisis and reduce the chance of it occurring again in the future.

 

Citizens should become informed of the choices facing the state and the negative impact that elimination of LGA and MVHC have on our community; please voice concerns to your state representatives.  The City Council anticipates a special budget workshop to address LGA and HMVC reductions in the near future.

 

2008 & 2009
total LGA
unallotments

Total change in 2010

LGA under Governor’s

February Budget

and unallotment

Total LGA lost under

Governor’s February

Budget and 2008, 2009
&2010 unallotments

Apple Valley

$0

$0

$0

Bloomington

$0

$0

$0

Brooklyn Park

-$484,239

-$184,239

-$668,478

Cannon Falls

-$208,998

-$470,857

-$679,855

Cottage Grove

$0

$0

$0

Eagan

$0

$0

$0

Red Wing

-$928,252

-$1518,176

-$2,446,428

Woodbury

$0

$0

$0

State Total

-$98,129,422

-$220,497,523

-$318,626,945

 

 
 
               
  
 

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