MINNESOTA - New Ulm is among several cities poised to benefit under a new Minnesota House bill revising the complex, confusing formulas of Local Government Aid.
The bill proposes reworking the LGA calculation formula into small, medium and large city categories, as opposed to just big or small cities under current law, and to have only one through three factors to calculate a city's need, compared to numerous factors under current law. It proposes to address the criticism from cities with high reliance on LGA for their budgets. Those cities say current law does not keep up with inflation, is too complex and has been underfunded for years.
The bill proposes
Rep. Ben Lien (DFL-Moorhead) introduced the bill Monday, along with numerous co-authors that including Rep. Paul Torkelson (R-Hanska) and Rep. Clark Johnson (DFL-N. Mankato).
The biggest change is the added factor of calculating for unmet needs. Cities with higher needs that do not have unmet needs covered by LGA will have a formula calculate a small portion of that need to be added to their LGA allocation. This is intended to factor in cities with weak tax bases that need to improve their budgets while simultaneously keeping funds from accidently being filtered to larger cities that do not need more monies.
Another important factor is that total appropriations for LGA being reorganized to adjust based on inflation, similar to how LGA total funding operated from 1994 to 2003.
Calculations for population decline factors will now be based on peak populations since 1970. The modification is supposed to address the additional need some cities have from building infrastructure during their peak, but not necessarily dropping the infrastructure during population decline.
The bill's goal is to make LGA more responsive and customized, while making the payments consistent so cities can plan future budgets.
It was drawn up through collaboration of metro cities and several Greater Minnesota organizations in response to Gov. Mark Dayton's initial plan to overhaul LGA while increasing LGA funding by $80 million in his budget proposal. His proposal, based on suggestions of a 15-mayor panel from mostly larger Minnesota cities, had planned to increase LGA funding for all cities in 2014. It was met with criticism from rural cities because it eventually dropped the LGA allocation back down to current or lower levels by 2018.
Dayton responded by allowing the Greater Minnesota organizations to draw up their own proposal to make a fair LGA distribution formula.
The new formula is intended to allow general increases in the total amount of LGA funding allocated result directly in all cities getting increased funding. Current laws have a variety of calculation factors that occasionally result in random cities getting no increase when overall funding is increased.
New Ulm poised to gain
The City of New Ulm is poised to receive a modest LGA increase that will be followed by slow, small increases over the subsequent year.
City Manager Brian Gramentz said the City still approves of the proposal, even if it was hoping for more funding to offset years of cuts.
"The key is it makes our funding stable," said Gramentz, "Staying flat is always better than going down."
New Ulm received $4.1 million in LGA for 2013. Current law has that figure set to decline to $3.9 million by 2018 or later. Dayton's proposal would have bumped New Ulm up to $4.5 million in 2014, but eventually dropped it down to the even lower $3.9 million in 2018 or later.
The new LGA bill would increase New Ulm funding by about $100,000 to $4.2 million in 2014 and continue with very small increases in the subsequent years.
Gramentz said the increases would be small enough they would effectively be unnoticeable in the years they occur, but would eventually add up to a net gain over several years. He said New Ulm would also be better poised for a better share of any LGA increase in the future, since the new formula factors in houses built before 1940 and houses built between 1970 and 1940. He said New Ulm has more than double the state average for houses in these categories, allowing it a potentially higher distribution of funding increase in the future.
The bill is scheduled for a hearing Wednesday in the House Property Tax Division committee.
(Josh Moniz can be e-mailed at firstname.lastname@example.org)