By Sara Strong
The city of Luverne doesn’t agree with its image of a bad guy in the state budget showdown.
In fact, much of greater Minnesota is objecting to a recommendation by State Auditor Patricia Awada to cut 42 percent in Local Government Aid. More than the recommendation itself, Luverne sees political statements about LGA as being loaded.
Some statements from the auditor’s office could leave people thinking cities like Luverne are coasting along, almost hoarding money, while the rest of the state foots the bill.
"There are assumptions and generalizations that are not true to Luverne in many cases," City Administrator Matt Hylen said. "While this is an interesting analysis they’re trying to make, it doesn’t fit Luverne."
Awada said, "This study shows that when it comes to overall city spending, the more LGA that a city receives, the more they spend. … When residents do not directly bear the full cost of programs, they are less likely to exert control of costs."
In the past, Luverne got increasing amounts of state aid as the state imposed taxing limits on the city, in effect stopping the local control that is now being urged.
Hylen said the city shouldn’t be penalized for good financial planning, having what he feels is a comfortable amount of reserves.
Financial Director Barb Berghorst said, "Across the board cuts in LGA would have a significant impact on the Luverne Governmental Budget."
However, she said, Luverne is right at the median level of state aid for non-essential services (about $113 per capita).
So if the auditor’s recommendation for cuts in LGA based on the median level of spending on non-essential services goes through, Luverne wouldn’t lose much in aid. … But other area cities would, and lobbying efforts on their part might change the story when the next proposal comes down from the capitol.
Essential, non-essential
Just to put the importance of LGA in perspective for Luverne — if it were eliminated altogether, city property taxes would quadruple. While that’s not proposed, any cut is a significant part of the city’s budget.
For the 2003 budget, local taxpayers will pay $534,818 of the total governmental budget of $3,537,615. The levy is actually a decrease of almost 3 percent from 2002.
When talking about non-essential services, like the library and parks and recreation. Essential services are those that provide standard city infrastructure like general government, public safety and streets.
Awada said in her report, "The [Office of State Auditor] found that while it is not feasible to totally eliminate LGA, or to make across the board reductions, it is possible to make adjusted reductions … and still allow virtually all cities to provide essential services at current levels, and non-essential services at the current per capita median level, without raising property taxes."
According to that median number ($113 per capita), Luverne’s non-essential services wouldn’t have to be cut.
Other cities in the area can’t say the same though: Pipestone spends $228 on non-essential services; Marshall spends $221; Windom spends $170; Jackson spends $163.
Berghorst said the richer Metro-area cities won’t feel much from any aid cuts, which is what bothers her the most. Those cities whole-heartedly support the LGA cuts, but have high property tax bases for their own non-essential services.
In all services, essential or not, Luverne is at or below the median (middle) spending level, and Berghorst thinks that’s an important point to make.
"Even though cities above the median LGA per capita spend 42 percent more on total current expenditures, they do it with 28 percent less property tax revenue per capita," the report said.
Berghorst points out that LGA was designed to help smaller cities keep population and businesses by stabilizing property taxes, while affording cities enough to pay for services.
The Metro area of the state isn’t without its own sort of state aid. The state took over suburban transit property tax levies costing more than $129.5 million in the current biennium. It will cost another $282.7 million in the next biennium.
The city of Luverne realizes that it, along with all parts of Minnesota government, will have to adjust because of the deficit. It just doesn’t want to be falsely pointed to as an easy budget solution.
