Minnesota city officials squirm over tax bill veto promise

The city of St. Paul saw a 21-percent cut in state funding in 2003, the year of a huge state budget deficit. Each year since then, St. Paul city officials have marched up to the Capitol to try and get the money back. But so far it hasn't worked. And this year appears to be no exception.

Because the cuts have not been fully restored, the city faces a multi-million-dollar deficit for the second year in a row, no matter what the governor does with the tax bill. St. Paul Mayor Chris Coleman says once again, St. Paul residents must pay a price to plug the hole in the city's budget.

"We're going to look at a combination of revenue increases, cuts to services, and look at different ways of doing things, and then look at some expenses we can defer," Coleman says. "But the problem is we've been kicking that ball down the street for a long time and there aren't a whole lot of options at this point."

St. Paul's current state appropriation is just under $60 million a year. This year, both the House and Senate approved a tax bill with a $7 million increase in local government aid -- LGA -- for St. Paul. Though it is extra money, it is less than half the amount the city says it needs just to recover from the effects of the 2003 cuts.

If Gov. Pawlenty vetoes the bill, as promised, he delivers a double whammy to St. Paul. The city gets no additional money, and its state appropriation actually shrinks by $2 million because of other measures that are scrapped as well. And St. Paul isn't the only city affected.

"There are a number of other cities that have been sufficiently concerned with the trends in the LGA formula," says Gary Carlson of the League of Minnesota Cities. Carlson has lobbied at the Legislature on behalf of cities that are also counting on the tax bill to stop a decline in LGA funding.

"A number of the inner-ring suburban communities have seen an on-going reduction in their LGA since the 2003 cuts, largely fueled by the spike in property values within the metro area which is reflected in the formula through a lower distribution," says Carlson.

Local government aid in the 2007 tax bill totals $550 million, an increase of $70 million statewide over current levels. That was a compromise between House and Senate proposals. Gov. Tim Pawlenty was initially open to an increase of $10 million. And he's not backing off from his promise to veto the tax bill.

"We certainly will go through it, we owe it a good review," Pawlenty says. "But it has some provisions in there that are very concerning to us."

One of the governor's main objections to the tax bill is a provision requiring state budget forecasts to include inflation in spending projections.

When asked what he would say to cities that may have to raise taxes and reduce services because of a veto, Pawlenty blamed DFL legislative leaders for including measures he calls "poison pills."

"I gave them fair warning," Pawlenty says. "They knew this was going to be a problem if they put it in the bill. They did it anyhow."

Mayor Coleman decries the governor's approach.

"The consequences don't fall to him," says Coleman. "He's not the one who has to lay off police officers, he's not the one who has to close libraries or rec centers. It may make him popular out in Washington D.C., but I hope people in St. Paul understand where the ax fell."

Overall, it hasn't been the best year at the Legislature for St. Paul. The governor has already vetoed a bonding bill that would have put a hefty deposit on the Central Corridor light-rail project as well as some funding for the Union Depot and a Great River Park project.

Pawlenty also line-item vetoed $2.5 million that would have gone toward debt relief for St. Paul's convention center. And a last minute attempt to gain legislative approval for a food and beverage tax in the city also failed.

Gov. Pawlenty has to decide whether to veto or sign the tax bill by Friday.