LGA revision bill passes through committee

ST. PAUL – The House bill that overhauls the Local Government Aid funding formula was put aside for later inclusion in a more comprehensive bill Wednesday during a hearing the Minnesota House Property and Local Tax Division.

A coalition of rural cities and metro cities organizations cooperated to formulate methods for distribution of LGA funds.

The bill simplifies city categories to small, medium and large with only a maximum of three factors calculating how much funding is received. House researchers stated that the factors, which vary for each category, were based around factors statistically shown to account for approximately 50 percent of spending variation with cities in individual categories. It also strips out complexities in the current LGA law.

The bill calls for overall appropriations scaled on inflation, which was done in 1994 to 2003, and it adds a calculation for unmet need. The changes affect how LGA funds are distributed so cities with greater needs get a bigger portion. There is also a formula to scale funding down when it is not needed. These provisions are intended to make LGA more customizable and have a more direct correlation in funding change.

The bill received strong support from the DFL members of the committee. They expressed interest in returning to the 2003 LGA funding levels, which were used before several years of LGA cuts to help balance the state budget. They emphasized that an improved LGA formula would help city budgets and possibly reduce property taxes.

Several Republican lawmakers on the committee objected to the bill. Rep. Pat Garofalo (R-Farmington) voiced concerns that the adjustment for inflation clause is based on the implicit price deflator factor. He was concerned that inflation consistently scales faster than personal income, resulting in automatic spending increases that would be the “baked into the brownies” of state budget.

Rep. Jerry Hertaus (R-Greenfield) questioned half the state population not being on LGA and objected to determining need on factors such as how many houses in city were built before 1940.

On the issue of half of Minnesota population, House researchers said around 25 percent of Minnesota populations are in townships that have not been eligible for LGA for decades and roughly 25 percent of the state’s population live in larger cities with strong tax bases that do not have “need” under LGA’s ideology. House researchers also said accounting for the housing built before 1940 and housing built between 1970 and 1940 are the only factors statistically correlated to account for things like more than 100-year-old sewer pipes and aging infrastructure. Data also showed that the bill would reduce the number of cities not receiving LGA from 107 to 85.

Rep. Linda Runbeck (R-Circle Pines) said she takes the other direction in wanting fewer cities on LGA. She objects to the concept as a spending enabler.

During the testimony portion, representatives from rural and metro city organizations supported the bill. They see it as a means to bring stability to LGA funding.

In related news, the Senate companion bill the LGA funding formula bill was introduced Wednesday. It is pending a committee hearing.

(Josh Moniz can be e-mailed at jmoniz@nujournal.com)

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