Cities cheered by budget proposal, but brace for cuts

Minnesota cities and counties encouraged by Gov. Mark Dayton's budget plan to restore funding for local-government aid might want to hold off on the celebrations.

Republican lawmakers who control the state Legislature responded coolly to the DFL governor's proposal to spend nearly a tenth of the state's general fund on local aids and credits. A GOP-backed budget plan that Dayton vetoed last week would have steered far less cash to local governments.

State Rep. Greg Davids, R-Preston, said cities and counties shouldn't presume they'll be spared from cuts, as the state must erase a $6.2 billion deficit. Davids, who chairs the House tax committee, said local governments must adjust to difficult economic times -- and they should expect less help from the state.

"Cities have to be able to plan. Now it's all up in the air because now they're feeling good: 'Oh look, the government's going to get this.' " Davids said. "Well, you're not gonna get that. It's not gonna happen. I would rather under-promise and over-perform. The governor is over-promising, and he will under-perform."

Davids said he would prefer to hold local government aid to the same funding level as last year. But under former Gov. Tim Pawlenty, a Republican, LGA took several hits. Over the past eight years, cities and counties saw a 24 percent decline in state aid, which help local communities pay for police and fire, libraries, street plowing, and other services.

Dayton said those cuts to local government aid have forced cities and counties to raise property taxes over the past several years. He said his budget will stop passing the buck to local communities.

"There will be no state-imposed property tax increases through cuts to schools and local governments," Dayton said. "The only tax increases will fall upon our state's wealthiest citizens."

The tax increases Dayton is recommending, including a temporary surtax, would give Minnesota the highest state income tax rate in the country. The governor also wants to spend $3.5 billion-dollars on aid to local governments.

At the Capitol, Republican leaders said they needed more time to vet Dayton's plan, but stressed that everyone, including cities and counties, should live within their means.

House Speaker Kurt Zellers doesn't buy the argument that cuts in local government aid will lead to local property tax hikes. He said mayors and county board members have bristled at the notion.

"There's a lot of them who said, 'That's offensive to us. We're going to do what we have, we're going to live within our means, and to automatically assume that we're going to raise property taxes isn't fair to us' " Zellers said. He also said it ignores the hard work local officials do, "when they go through their budgets and set up their priorities in their cities or counties."

But property tax levies have increased -- by nearly 65 percent since 2002, according to Minnesota's department of management and budget.

Jim Miller, executive director of the League of Minnesota Cities, said local governments appreciate Dayton's proposal, but remain guarded.

"We're also realists and we know the budget deficit they're facing is unprecedented, and that the solutions are going to be difficult," Miller said. "I don't think there would be a city official in Minnesota sleeping more comfortably tonight with an assurance that what the governor has recommended is necessarily what we'll end up with."

Reaction to Dayton's budget among local governments is mixed.

St. Paul Mayor Chris Coleman, a Democrat, says his city is counting on the state to deliver$125 million to St. Paul over the next two years. But if the state holds back, the city will deal with any changes, he said.

"It's irresponsible for us to try to guess what final number is going to be, either because it would require me to lay off a worker who is dependent upon that job to support their family, or it would require me to raise taxes speculatively," Coleman said. "Neither of those options is acceptable to me, so we'll deal with the facts when they become law."

But in Grand Rapids, City Administrator Shawn Gillen is planning on losing local government aid and has been trying to wean his city off it. Gillen said if there are no cuts, he'll use the extra cash to pay down the city's debt -- or maybe buy a new dump truck.

Others expect a compromise.

"The Legislature has a part in the resolution too," said Albert Lea's interim city manager Patrick McGarvey. "The goal posts have been set. Gov. Dayton is at one end of the field and the Republican caucus is at the other."

McGarvey's staff "is starting to work on 'what if,' " he said. "If the governor's position prevails 100 percent, we're set with the budget we have for this year. And, conceivably, it wouldn't be a rough 2012."

Albert Lea's budget includes its full LGA allotment of more than $5 million, amounting to a third of total expenditures.

"We haven't set aside any specific deletions at this point," McGarvey said. "We've already made deletions in previous years and it's time to draw the line."