Dayton’s revised budget offers better out-state LGA distribution

SOUTHERN MINNESOTA – Greater Minnesota cities are poised to received a better distribution of Gov. Mark Dayton’s increased Local Government Aid (LGA) funding proposal under his revised state budget.

Dayton’s original budget and tax proposals at the start of the year sought to revamp Minnesota’s tax system with a broadened and reduced sales tax that would fund new education investments and tax items like a $500 tax rebate for all Minnesota homeowners.

The proposals included a $80 million increase in LGA funding and a $40 million increase in county state aid funding. The proposals drew heavy praise, especially from rural cities, because they would begin tackling years of cuts to LGA funding. However, they were also met with rebuke from most rural cities over the proposed distribution of increased funding. The proposal increased LGA funding beyond the current allocations for nearly all Minnesota cities in 2014. But, rural cities would see that funding gradually drop to the current levels or lower by 2018, while the Twin Cities areas would see big increases. The 15-mayor Tax Reform Advisory Group on Local Government Aid panel appointed by Dayton was the organization to draw up the initial distribution proposal.

In the example of New Ulm, the city is facing slight LGA funding reductions under current state law to about $4 million in 2014. Dayton’s proposal would instead increase that LGA funding to $4.5 million in 2014, but gradually drop it back down to $4 million by 2018.

The City of New Ulm, along with many rural Minnesota cities, have been critical of the current LGA funding level for years, since the years of heavy LGA funding cuts by Minnesota Legislature were supposed to be temporary budget fixes. The large budget cuts the City of New Ulm has had to pursue over the last few years have been significantly fueled by reduced LGA funding. To limit property tax increases, the City of New Ulm effectively ended introducing any new city construction projects to focus on only maintaining existing city infrastructure. City road reconstruction is steadily falling further and further behind and the percentage of city roads in need of serious repair is increasing due the limited funding level of the Street Department. During the ongoing 2013 budget work, the City even briefly considered cutting its K9 unit and ending the subsidy that effectively funds the famous New Ulm Battery, though it has been able to avoid these cuts so far.

Under Dayton’s revised budget proposals, the broadening of the sales tax and the $500 property tax rebate will disappear. But, the $80 million LGA funding increase and $40 million county aid funding increase will be kept.

Dayton said he is glad he can keep the LGA increase as another method for trying to reduce property taxes. He said he has fully heard the criticism of the distribution proposal by Greater Minnesota organizations and is willing to allow them to draw up a proposal they consider fair. He joked that meeting with them was the roughest experience he has ever had with an organization he wants to give $80 million.

He said the Greater Minnesota organization has made a historic move in how well they are working together to draw up a distribution proposal for the LGA increases. He said they will introduce their proposal as a bill in the Legislature and bring it up through the tax committees.

Rep. Paul Torkelson (R-Rural Hanska) said on Friday that the Greater Minnesota organizations have already completed their work on the proposal and will introduce it in the Minnesota House early next week. He said the full details will be released with the bill, but that it roughly takes the current state funding system and adds a factor accounting for the needs of cities that rely on LGA. He said the mechanism will allow rural cities that needed the LGA funding to function to get first preference in funding distribution over bigger metro cities that do not necessarily rely on the funding. He said he has already signed on as a co-author for the bill.

Josh Moniz can be e-mailed at

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