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Rural areas get less of state aid pie

By State Rep. Paul Anderson, District 12B Starbuck, MN Responding to the needs of local units of government, the Legislature during the last session increased funding for Local Government Aid (LGA) to the tune of well over $100 million. In the past, that money had been allocated based on a complicated formula that favored rural Minnesota, along with the state’s two largest cities, Minneapolis and St. Paul. The logic behind that thinking was that rural areas of the state had lower tax bases and that the two cities had a greater need on a per capita basis. Out-state Minnesota received nearly 69 percent of the total amount of funding, with the Twin Cities getting around 27 percent.

With the changes made to the formula last year, those distribution percentages are changing. To my way of thinking, these changes are just another example of rural areas getting less of the overall pie, with the metro getting more. By 2015, the share of LGA going to Greater Minnesota will decrease from 69 percent down to approximately 65. Minneapolis and St. Paul will stay at roughly the same percentage, while suburban areas will jump from 4 percent up to 8 percent. Most of that increase is slated for the older suburbs with aging infrastructure and less open space to grow.

Over the next two years, total LGA funding will increase from $427 million up to $565 million. Those increased dollars will be split nearly equally between Greater Minnesota and the metro area. In addition, any new money in the future will also be split 50-50 between the two areas. That means, over time, the metro area’s share of LGA will increase relative to Greater Minnesota.

The new formula does away with the designation of “regional centers.” In the past, those cities with populations of 10,000 or greater received additional funding because it was thought residents who lived outside those cities did at least some of their shopping and other business there and made use of those cities’ infrastructure. The city of Alexandria had not been listed as one of those cities and was making a push to receive that designation. Now, that’s a moot point.

Under the new formula, 41 cities will be receiving LGA that had not been getting any previously. Of that total, 32 are in the metro area, while nine of those cities lie in Greater Minnesota.

A group that represents cities in outstate Minnesota, the Coalition of Greater Minnesota Cities, will be pushing for additional LGA funding in the upcoming legislative session. Even though it’s not a budget year, they feel that if any supplemental money is allocated for tax relief, the first $57 million should go to LGA. My major concern with this plan is that simply increasing LGA funding doesn’t automatically cause a reduction in property taxes. That same argument was used as a reason for the increase in LGA last year, and preliminary numbers show the overall statewide levy for taxes payable in 2014 to be increasing slightly.