The Free Press, Mankato, MN

State budget: a closer look

June 25, 2011

Hentges predicts LGA will be put on sliding slope

MANKATO — Mankato City Manager Pat Hentges doesn’t make dire predictions for 2012 if the tax legislation proposed by the Republican-controlled Legislature prevails when lawmakers and Democratic Gov. Mark Dayton ultimately reach a budget agreement. 

Hentges predicts, though, that outstate property owners will be facing a bumpy ride just a bit further down the road.

Mankato was slated to get $7.9 million in 2012 under the state’s Local Government Aid formula — a nearly 40-year-old program aimed at helping towns and cities with lower property wealth avoid excessive property taxes.

Dayton’s budget would provide the certified amount for Mankato and other cities in the state, although the governor has since offered to make more budget reductions in an effort to reach a compromise with the GOP. Those unspecified $1.6 billion in additional reductions could impact LGA amounts.

The Republican budget offers most cities the same amount of LGA as they received this year — about $6.2 million in Mankato’s case. But this year’s level is a reduction, agreed to by former Gov. Tim Pawlenty and the previous DFL-controlled Legislature, as part of the last deficit reduction effort.

Mankato’s LGA was nearly $8 million four years ago and more than $9 million a decade ago. Holding steady at $6.2 million for the next two years probably means more cuts and more property tax hikes, Hentges said.

Rising fuel and energy prices have driven up costs, and a weak housing market has blunted any growth in the tax base, he said. State aid stuck at the reduced rate means the city will have to turn to its levy.

“You have to have a tax increase,” he said. “And I don’t think there’s anything else we can cut after cutting our spending by 15 percent and cutting our work force about 10 percent.”

A longer term threat comes from the legislative tax proposal’s provision to eliminate LGA over four years for Minneapolis, St. Paul and Duluth. Along with reductions in renters credits and other property tax credits, the Republican proposal reduces that section of the state budget by more than $440 million compared to current spending.

Those cities, represented exclusively by Democrats in the Legislature, represent three of the four Class I cities in Minnesota. Rochester, a traditionally Republican city that recently has become a partisan battleground, is the fourth Class I city but was left off the LGA elimination list. Republicans say the decision was based on the property wealth of the Twin Cities and Duluth rather than political considerations.

Hentges expects there will be attempts in future years to wean Rochester, Mankato and other regional centers off of LGA if lawmakers are successful in dropping the Twin Cities and Duluth from the program over the next four years.

“I’ve heard as much as that in off-the-record comments by people who support that,” he said. “I think it’s inevitable.”

If the first three cities go, followed by regional centers, dozens of lawmakers who were previously strong supporters of LGA would no longer have a stake in the game. Smaller outstate cities would then be vulnerable to a complete elimination of the program, Hentges said.

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State budget: a closer look