State's budget woes hit home

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With Minnesota facing a projected $4.8 billion deficit in the next two years, threatened cuts in state aid to plug a $426 million short-term hole have left local government leaders feeling jilted.

Now they’re scrambling to make up for the costs of the state’s broken promises.

At a special budget meeting Thursday, Douglas County Auditor/Treasurer Tom Reddick told county commissioners that the state owes the county about $1.37 million out of $2.74 million in promised aid for 2008.

“We won’t get it all,” Reddick said. “We’ll get a portion of it, but how much I don’t know for sure.”

Like all other local governments in Minnesota, Douglas County receives its yearly state funding in two installments – half at the beginning of the year, and half at the end.

But with the state still needing to account for a potential $500 million near-term deficit, and $340 million in local aid as one of the few remaining unspent items in the state’s current budget, many Minnesota cities and counties can’t bank on getting their expected second-half payments.

Governor Tim Pawlenty, who’ll likely have the final say on the issue, has said he wants to work with legislative leaders to resolve the short-term gap but ultimately may use his executive authority to withhold unspent local aid.

Senator Bill Ingebrigtsen, R-Alexandria, said he doesn’t agree with using money meant for cities and counties to pay off this year’s deficit.

“I don’t like promising people money and then cutting it out,” he said. “[Cities and counties] have already budgeted for [local aid] … and if they don’t get it, it’s going to look pretty bleak.”

Reddick said he figures Douglas County will have to make up for roughly $586,000 in undelivered state funding for 2008, which it will cover by cutting into its cash reserves.

“That is the only place it can come from,” he said, “because this is money that’s already been spent.”

The county incorporates its state funding allotment when it sets its budget each year, Reddick said, so even if it doesn’t get reimbursed – as is possible this year – the county still has to pay its bills.

“[The state] promised us all this money and funding, and we made our plans and delivered our services, and now [they’re] not going to pay for it,” he said. “It’s kind of like a lot of people who can’t make their mortgage payments.”

With about $11 million in cash-flow, Reddick said Douglas County can afford to take a hit in local aid this year, but doing so will make budgeting more difficult next year.

“Now we are going to have to take out reserves, and we’re not going to be able to tax for it,” he said, “because of [tax] levy limits.”

The limitations, he said, means the county has to dip into its reserves without any way to recoup those losses later on.

The city of Alexandria finds itself in a similar situation, as it stands to lose up to $670,000 in local aid.

Of its roughly $8.7 million 2008 budget, about $1.3 million was supposed to come from state funding.

Like the county, Alexandria has savings it can tap if it has to, but not without a cost, said Mayor Dan Ness.

The city will likely have to delay important projects, he said, such as street repairs or building and equipment upgrades.

Ness said officials are already re-examining whether the city can afford to hire two more police officers.

“We’re not the ones in deficit,” he said. “It’s the state that’s in deficit.

“And then to criticize us for having poor spending habits, that doesn’t wash with me either.”

Ness said Alexandria, along with cities across Minnesota, endured similar cuts in 2003 when the state had to slash local aid to solve a looming deficit.

State funding for local government hasn’t been the same since, he said, though more had been promised previously by legislators in exchange for cities and counties accepting levy limits.

Ness said while cities are willing to pay their fair share to help solve the current budget crisis, they should not have to pay a disproportionate amount of the cost.

“If [the state] is going to make cuts it better be darn well fair and equitable this time,” he said, “or [state legislators] are going to have a bunch of mayors in overalls with pitchforks going down to the Capitol and raising a commotion like they haven’t seen in a while.”

Tags: state, budget, deficit, douglas, county, alexandria, city