As hard as it may be for the city to wean itself from local government aid, Roger Reinert, D-Duluth, told constituents Tuesday not to count on state money to flow as it has in the past.
When Minnesota's political districts are redrawn to reflect 2010 Census data, Twin Cities suburbs will gain political strength, and Reinert predicts they will take aim at local government aid, which provides about 40 percent of Duluth's annual funding.
"I think we need to talk about what other models are out there," Reinert said, as he addressed local businesspeople at a forum organized by the Duluth Area Chamber of Commerce on Tuesday morning.
But this session, Reinert holds out little hope that thoughtful structural change will be considered.
"For this year, I think we're just going to tinker around the edges," he said.
That tinkering could come at great expense to Duluth. The Minnesota House proposes to sharply cut, then halt all LGA payments to Minneapolis, St. Paul and Duluth by 2015, while making no change to what other cities in the state receive.
Meanwhile, the Minnesota Senate has proposed an across-the-board reduction in LGA of about 10 percent to 12 percent.
Duluth Mayor Don Ness said the city already has anticipated a 5 percent reduction in LGA funding, delivering a $1.5 million hit to the municipal budget.
By continuing to hold some positions open and delaying planned capital expenditures, Ness believes Duluth could absorb the $3.5 million cut proposed by the Senate without resorting to layoffs or increased taxes.
But the House's proposal to cut in half the $30.9 million in LGA funding Duluth was to receive this year and to eliminate it altogether by 2015 would force more difficult choices, Ness said.
"If LGA is eliminated, regional cities like Duluth would need to raise taxes or cut services," he said.
Ness said the House targeted three of Minnesota's first-class cities, but gave a free pass to Rochester, which recently surpassed Duluth in population. He suggested that there's no logical explanation for the exclusion other than politics, suggesting that Rochester's Republican representation garnered preferential treatment from the party that's now in control of the Legislature.
Differences in the Senate and House proposals for LGA should be hammered out in conference committee, but even with the scheduled end of the legislative session less than three weeks away, Reinert said there has been no sincere effort to find a compromise yet.
Given Gov. Mark Dayton's steadfast support for continued LGA payments to cities, Reinert said he suspects the Senate proposal will gain the upper hand in conference committee.
Although some critics of LGA have compared it to welfare, Ness disagrees. He pointed out that Duluth sends about $80 million in sales tax revenues to St. Paul each year and receives back less than 40 percent of the sum. That doesn't begin to take into account the state income taxes generated by residents of the city, either.
"The economic health of Duluth is important to the state of Minnesota," Ness said.
Reinert explained that LGA payments were targeted to help larger cities provide "overburden" services, including fire and law enforcement functions that can benefit an entire region.
About 30 percent of Duluth library card-holders live outside city limits, Ness said. He said that people from throughout the region also make use of Duluth's extensive park system and other attractions.
Reinert noted that nearly two-thirds of the region's jobs are generated by Duluth, too.
Long-term, Reinert contends the state should look at different ways to support regional centers via LGA, perhaps with a new general sales tax or an occupancy tax that would collect revenues not only from people who live in a community but those who work in a city and reside elsewhere. Reinert also suggested it may make sense for cities that serve as regional centers to partner with neighboring communities to form regional taxing authorities set up to deliver certain services.