Luverne stands to lose $89,631 this year and $79,351 next year if plan is approved
By Sara Strong
With the new legislative session opening Tuesday, Rock County and area city leaders are watching for developments, especially those related to Gov. Jesse Ventura's budget proposal.
In order to compensate for an almost $2 billion state budget shortfall, Ventura has proposed additional state taxes and spending cuts.
Luverne City Administrator Matt Hylen is keeping his eye especially focused on proposed cuts to Local Government Aid, which is to supply the city with almost $1.4 million in property tax relief in 2002.
"It is a danger to the city that this money could be cut," Hylen said.
Ventura had first said a 20-percent cut in LGA was warranted, but has since reduced it to what would amount to $89,681 in 2002 and $79,351 in 2003 for Luverne.
Hylen said that still translates to big budget impacts for a city with Luverne's tax base.
The Coalition of Greater Minnesota Cities, which represents outstate city interests, agrees. It maintains that the governor's concern has remained focussed on the Metro area.
The Twin Cities and their surrounding suburbs wouldnÕt feel the crunch cities like Luverne would. For example, Medina, population just more than 4,000 gets $4,501 in LGA so a reduction in aid wouldn't hugely impact its overall budget.
Medina taxes less than Luverne does due to significantly higher property wealth. Its tax rate is 102 compared to LuverneÕs 135. Higher wealth cities are able to receive more money from taxpayers with lower tax rates.
If Luverne has to make up for lost state aid with taxes, residents will notice in either significantly increased property taxes or reduced services.
"We're government," Hylen said, "and we have to pass on the cost or cut services. This could have long-term impacts; it's not a quick fix."
If citizens don't voice opinions to state lawmakers before decisions are made, they are doing themselves a disservice, Hylen said. The city's future budgets and tax rates will be reactionary to the state decisions, so looking to the city later on may be too late.
Targeting reserves
The original idea for LGA cuts came from Ventura's perception that cities are sitting on plump bank accounts.
In looking for ways to trim the budget, Ventura noticed cities often have healthy reserves. Hylen said those bank accounts that often look healthy need to last the city six months between aid payments.
"It's good fiscal planning to have reserves for projects the city is working on," Hylen said. In fact, the state isn't spending $1 billion of its reserves for the same reason.
State economists had previously advised that cities hold on to some of their reserves because of an impending recession.
Hylen said that if big budgets are a concern for the governor, then Ventura should be examining the state's. The stateÕs budget has more than doubled since 1990 while the city's has increased by only one-third.
And during those years, state aid to Luverne has remained steady, according to City Financial Director Barb Berghorst. She said that if inflation is considered, state aid has actually decreased through the years.
"It aggravates me when the state is claiming that cities are being irresponsible with their money," Hylen said.
Another point the city is considering when opposing the governor's plan is its credit rating. If the city changes spending habits too drastically or spends down the reserves, it could affect bond ratings for projects like this year's proposed street improvements.
When the city takes out a bond for extra funds, an interest rate is attached. A better credit rating usually gets better interest rates. Those interest rates are passed on to taxpayers, or in the case of special assessments, specific property owners.
LGA is property tax relief used for police, fire, parks, streets, the pool and the library. It provides 59 percent of the revenue to fund these services.
Effect of cuts
on county budgets
Similar aid for counties is called Homestead and Agriculture Credit Aid. Rock County will see reduced reductions of $53,193 and $64,967 in 2002 and 2003 if Ventura's proposal passes.
Rock County Administrator Kyle Oldre said he isnÕt sure how much legislative support the governor's proposal has.
But if it's support grows, state services that the county is required to use may cost more too.
"If they make the reductions and increase our costs at the same time, that'll put us in a squeeze," Oldre said.
Human Services and Corrections are departments the governor proposed reduced spending in, and Rock County would notice.
In Human Services, for example, the governor's plan calls for the county's share to double in what it pays for the Willmar treatment center. It also would cut Welfare to Work program funding and reduce many educational programs for state aid recipients.
Both the county and city realize the governor's proposal is just getting looked at by legislators. But if Minnesota residents want to support or counter it, the time to do that is now.
