Commentary: Reality of city aid cuts vs. Pawlenty spin
City officials have drawn Gov. Pawlenty's ire by pointing out the consequences of his proposed cuts to city aid programs. For most Minnesotans, property taxes will go up and essential services -- including public safety -- may be reduced. The governor thinks these claims are exaggerations. We wish he was right.
If passed into law, the governor's budget-balancing solution would draw hundreds of millions of dollars out of property tax relief programs, including state aid to cities. In addition to keeping property taxes fair statewide, aid to cities funds police, fire protection, libraries and other essential city services.
Part of the governor's grounds for refuting property tax increases and public safety reductions is the misleading notion that his plan cuts cities by "only 5 percent." The governor stops short of explaining that this "5 percent" cut is only for 2009 and does not include the 4 percent last-minute cut in December that cities are also accounting for in 2009; in 2010, the governor proposes cutting aid to cities by 10.5 percent. So what's this mean in actual dollars? Cities will have to reduce their 2009 and 2010 budgets by $369 million under the governor's plan.
Because public safety accounts for a major -- if not the largest -- portion of city budgets, cities have stated that cuts to city aid programs will unavoidably affect police and fire protection services. This has sparked outrage from the governor, who challenges city officials to reassess their priorities.
The safety of residents will always be a top priority for cities, but the governor's long-held opposition to Local Government Aid -- a specific city aid program -- has left few alternatives to public safety reductions. Cities have been running lean since the governor cut Local Government Aid by 25 percent in 2003. Over the past six years, Local Government Aid has yet to fully recover its lost funding. In actual dollars, LGA received $156 million less in 2008 than its certified 2003 allotment; in inflation-adjusted dollars, that gap balloons to $247 million.
Because LGA is a property tax relief program, funding reductions have resulted in widespread property tax increases. Between 2002 and 2008, property taxes have spiked nearly 26 percent when adjusted for inflation. This increase has in no way replaced lost LGA.
Total city and town revenue -- which includes property tax payments and state aid -- has actually decreased 12.4 percent since 2002. With the governor's own administration projecting property taxes to increase an additional $626 million as a result of his proposal, residents will continue to see a low return on their property tax dollar.
Reduced revenues have forced cities to deal with the dramatically rising cost of items such as employee health insurance, construction materials and fuel for their fleets of vehicles by cutting services long considered untouchable, including public safety. In many cities, vacant public safety positions have been left unfilled and equipment purchases, such as fire engines and other critical rescue items, have been delayed. Several small cities have gone so far as to eliminate their entire police force.
To deflect blame for property tax increases and public safety reductions, the governor has resorted to distractions, his favorite being the ploy that cities are hoarding excessive reserve funds -- or "rainy day funds" as he calls them -- which should be drained to soften the blow of aid cuts. Reserve funds are in no way "rainy day" emergency funds. Cities receive revenues only twice a year, but must pay the bills and make payroll on a continuous basis. Adequate cash-flow reserves allow a city to responsibly manage daily operations and avoid budgeting from crisis to crisis, unlike the state's budget practices.
No matter how the governor spins his budget plan, cuts to LGA translate into property tax increases and reduced essential services, including public safety. LGA is -- and will always be -- a priority for cities, because we believe Minnesotans and businesses deserve safe, attractive, affordable communities no matter what corner of the state they live in.
Jerry Miller is mayor of Winona and Rick Wolff is mayor of Hibbing. Both cities are members of the Coalition of Greater Minnesota Cities.