City leaders plead for state checksDisaster. Crisis. Insane. Unfair. All are words Minnesota's city leaders used to describe the prospect of the state chopping payments later this month.
By: Don Davis, State Capitol Bureau
ST. PAUL – Disaster. Crisis. Insane. Unfair. All are words Minnesota's city leaders used to describe the prospect of the state chopping payments later this month.
Officials of more than 70 cities filled two legislative committee meetings Wednesday, warning that proposed Local Government Aid and other state payment reductions would have a long-lasting impact. And, they said, their budget year ends this month, so there is no time to make up for the cuts.
The discussion came as state policymakers decide how to plug a hole in the current state budget, before tackling a $4.8 billion deficit for the next two-year cycle.
As the discussion started Wednesday, State Economist Tom Stinson told senators that the $426 million deficit he predicted just last week could balloon closer to $500 million in light of bad economic news the last few days.
The problem state officials face is that most money in the current budget has been spent, so local aid is one of the few pots of state money still available for cutting.
Cities and counties are counting on $340 million from the state later this month. Some of that money is being eyed to help plug the budget deficit.
While Gov. Tim Pawlenty has the final say in balancing the current budget, he says he wants to reach an agreement with legislative leaders. A decision is expected by Christmas, although on Tuesday Pawlenty said he could delay local payments due to be distributed at Christmastime if he has not decided how to balance the budget.
City leaders met with Pawlenty Wednesday, as well as House and Senate committees that deal with local government aids.
Those at the Pawlenty meeting said no decisions were made, but Apple Valley Mayor Mary Hamann-Roland said the governor appeared to consider what city leaders had to say.
House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, said one of the key points mentioned to Pawlenty was that cuts this late in a city's fiscal year are bound to hurt public safety services such as police and fire – "services very critical."
Many local government leaders and most lawmakers say city and county aid payments will be reduced, but Kelliher said state policymakers still are looking for "better ways to do this."
City leaders told Pawlenty, among other things, that since half of many cities' budgets come from state aid of various types there is a lot at stake and little time left to deal with reductions.
"Cities are 21 days from the end of their annual budget," Wadena Mayor Wayne Wolden told lawmakers.
"These cuts at this time are going to be very, very difficult," said former mayor and Rep. Paul Marquart, DFL-Dilworth.
Wolden, president of the 81-member Coalition of Greater Minnesota Cities, said most money already is spent, "making it almost impossible for us to deal with a reduction."
The mayor said he fears Pawlenty will chop local payments like he did to solve a similar 2003 budget problem.
"We don't want to be the low-hanging fruit like we were in 2003," Wolden said.
Wadena is lucky, he said, because it can borrow from a utilities fund to cover state cuts. However, many cities do not have that luxury.
In a House committee meeting, some Twin Cities lawmakers suggested that ethanol producer subsidies be cut as part of the budget-balancing process. However, that fund is a fraction of that planned for cities and counties.
Much of the talk around the Capitol is that about 25 percent of local aid payments could be cut, although Pawlenty himself has not publicly discussed any particular reduction level.
A complete elimination of the December payments – one of two a year – is not likely.
"It makes no sense to take that level," Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, said.
Sen. Rod Skoe, DFL-Clearbrook, joined small-town mayors to remind urban legislators that city services such as fire departments also help rural areas.
An official of Arco, near the South Dakota border, said his city could have to drop its small fire department if aid is cut.
"Our Main Street is non-existent," councilman Tom Meneely said of his 100-population town. "This could cost us our fire department."
"It seems to me that we are tightening the noose on these cities," Sen. Julianne Ortman, R-Chanhassen, said.
County leaders were wrapping up their annual meeting in Duluth on Wednesday, but sent word to lawmakers that they would face problems similar to cities if aid were cut.
Sen. Tom Bakk, DFL-Cook, said he is concerned that Pawlenty could make massive local aid cuts.
"The governor has not been all that supportive of LGA," Bakk said.
Wolden said city officials are asking Pawlenty to allow full city aid payments to prevent a crisis. Otherwise, he said, "some might not be able to make payroll."
Bemidji Mayor Richard Lehmann said people expect the city to provide public safety protection and services such as snow plowing. But they risk being cut, he added.
Lehmann said his City Council is to finish work on its budget next Monday night, before Pawlenty is to make his decision on where to cut.
"We're running on bare bones," he said.
Further cuts in fire department operations, he said, could lead to lower insurance ratings and higher insurance policy premiums for Bemidji residents.
Willmar Mayor Lester Heitke said a statewide Local Government Aid cut would not be fair. Some cities get no LGA, he said, while some small cities depend on it for much of their budgets.
"We're looking for fairness and equity," Heitke said.
Litchfield City Council member Connie Lies said a state aid cut would end up hurting the state. She said if cities are forced to lay off workers, they would go to the state for unemployment compensation, which results in a higher cost. Those layoffs, in turn, would reduce the former city workers' buying power, which would hurt retail sales and result in lower taxes and perhaps more layoffs, she added.
In Melrose, the city administrator fears for the city's future if there are major aid cuts.
Administrator Brian Beeman said half of the budget comes from the state. Since the 2003 state budget deficit, the city has run on "skeleton budgets," he added.
Detroit Lakes Mayor Larry Buboltz said his community will be able to get by if an LGA cut is not massive, but he fears problems down the road.
"It does affect next year," he said, adding that the 2009 budget already has been written and approved.
The problem would be immediate if aid were cut 25 percent, as many in the Capitol predict.
"Twenty-five percent is a huge amount," he said.
Red Wing council member Carol Duff said a modest LGA cut is manageable.
"We can handle some cut," she said.
There is little flexibility in the budget with less than three weeks left in the fiscal year, Duff added.
“If these aids are cut, the state is simply passing the buck on to local governments,” said Dave Osberg, Hastings city administrator and president-elect for Metro Cities. “Instead of quick fixes we need to work together on solutions that stabilize the state’s relationship with cities for the long term.”
Other comments from city leaders included:
-- "Limit the hurt," Wadena City Councilman Pete Phillips said. "And don't incur it on those who have debt upon debt."
-- Morris officials "couldn't comprehend losing" half of their 2008 Local Government Aid payments.
-- Benson has no reserve from which to replace cut payments.
-- Granite Falls already faces what amounts to a $500,000 deficit, before any aid cuts.
-- A Park Rapids fire truck order may be canceled and federal funds may be lost because the city cannot match them for some construction projects.
-- Ely may have to operate in a deficit.
-- "It would be insane for the state to cut payments," International Falls Administrator Rodney Otterness said. "I am extremely concerned about their relationship between cities and the state."