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Cities, counties brace for cuts

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State Capitol Bureau photo by Don Davis Goveror Tim Pawlenty announced Monday how he will cut $1.2 billion to balance the state budget. Also pictured is Management and Budget Commissioner Tom Hanson.2 / 2

If Governor Tim Pawlenty's budget proposal is approved, local governments would have to come up with some creative new ways of saving money.

Alexandria Mayor Dan Ness listed a few possibilities:

Letting the snow sit longer on city streets.

Not mowing city parks as often, perhaps calling on volunteers in the neighborhood to pitch in with the mowing.

Holding off on filling the positions of city employees who retire.

Or - and this would be only as a drastic measure, Ness said - closing down city parks or the Runestone Community Center.

Alexandria already lost $476,915 this year when the governor decided to unallot local government aid (LGA) to balance the state budget.

The governor's proposal on Monday would result in Alexandria losing another $536,018 - a combined impact of more than $1 million.

"We're going to have to go back to the drawing board again," said Ness on Wednesday. "We're going to have to continue to do more with less."

The one saving grace Ness sees in the matter is that the governor's proposal at this point is just that - a proposal.

"Hopefully, it won't end up that bad," said Ness about the additional cuts. "His plan is usually the worst case scenario."

The big challenge in dealing with the additional cuts is that the city would be forced to plug the hole quickly, Ness said.

It can't increase property taxes - those have already been collected for the year. Even if it decides to do so during the next budget cycle, it would take a tax hike of about 21 percent to cover the cuts - a distasteful way out, Ness said.

Cutting city staff also isn't the answer, said Ness. After separation pay and benefits are doled out, the city wouldn't see any savings for a year or so, Ness said. "It's not an immediate budget fix," he said.

Dipping into the city's reserve funds also has drawbacks. The state recommends cities to carry a healthy fund balance and it helps the city maintain a good bond rating. This results in lower interest rates that can save the city significant money when it borrows money for projects.

Ness planned to attend the Coalition of Greater Minnesota Cities Legislative Action Day in the Twin Cities on Wednesday, along with a League of Minnesota Cities directors' meeting. He hopes that he'll be able to bring back some ideas to the council.

Ness said he expects the city's budget committee will meet soon to prepare contingency plans to make up for more losses.

"If, in fact, the reductions go through, we'll have to move quickly and we must be in a position to do that," Ness said.

In the past, LGA cuts have not affected smaller cities but that's not the case with Pawlenty's latest proposal. Small cities throughout Douglas County would be impacted (see chart).

Ness said that those smaller cities simply don't have the resources to recoup the loss. He predicted that some cities might be forced to take drastic measures such as disbanding their police departments.

Cities aren't the only ones bracing for cuts. Counties are too.

Paul Anderson, chair of the Douglas County Board, said if Governor Pawlenty has his way, the county will run into severe budget issues for 2011.

"We're pretty well set for 2010," said Anderson, "but 2011 could be disatrous. If he [Pawlenty] gets his way, we could stand to lose a substantial amount of money."

Douglas County has already lost $560,043 through unallotment, which is 2.41 percent of the county's levy.

If Pawlenty's plan goes through, the county could lose an additional $773,851 of local government aid and $298,346 in market value credits.

As chair of the board, Anderson said the commissioners will have to find a different way to dispense services or maybe even take a look at decreasing services to help balance its budget next year.

"It's going to be a tough year financially," he said.