Minnesota legislators missed a self-imposed deadline of midnight Thursday to pass spending bills, leaving cities still in the lurch over state aid funding.
"We're in crunch time, this is a very critical time in Minnesota for local governments," Wadena Mayor Wayne Wolden said earlier this week in a telephone news conference call.
"Extreme measures will have to be taken, and already are being taken," said Wolden, also president of the Coalition of Greater Minnesota Cities. "I'm hearing from communities north to south, east to west. They're freezing salaries, they are moving to higher deductible insurance plans. They're reducing work hours, and sometimes cutting all part-time staffing. There are hiring freezes taking place."
No matter what proposal wins out in the Legislature, Bemidji will lose Local Government Aid. It's just a matter of how much.
Cities already lost aid last December when Gov. Tim Pawlenty unallotted second-half 2008 Local Government Aid to cities, and the uncertainty of what the Legislature does has cities scrambling in their 2010 budget talks, he said.
LGA funding is part of the omnibus tax bill, with a conference committee still hammering out differences between Senate and House versions.
Cities of all sizes across the state will be impacted, said St. Paul Mayor Chris Coleman, who joined Wolden in the news conference call.
"We have struggled since 2003 when the governor first balanced the budget of the state of Minnesota when they had a deficit back then, primarily on the backs of local units of government," Coleman said. "This is another part of the proposal where cities would bear a disproportionate share of the burden."
St. Paul has already made significant cuts over the years, he said, "in trying to more with less." Eight recreation centers were closed, efficiency audits have been done in the city's police department. "We have looked at ways to trim, we have looked at ways to not impact directly public safety, but actually try to enhance it."
St. Paul was slated to have 630 police officers in 2009, but because of a hard hiring freeze, the city is down 40 officers from that authorized prior level, Coleman said. "The governor's proposal would have had very draconian and very dramatic impacts on our ability to provide public safety."
Coleman, who is mentioned as a potential 2010 Democratic gubernatorial candidate, said that if Pawlenty's LGA cuts are made law, the city could cut every park, every library, eliminate the city attorney's office and basically all discretionary spending "and we'd still have to cut into police and fire services in order to be able to meet the budget challenges that we face."
LGA was a partnership between cities across Minnesota and the state to try to equalize distribution services, Coleman said. Some cities have greater needs but smaller property tax bases. "It is important we continue to honor that and work on that," he said.
Of the three proposals at work in the tax conference committee, the Senate does the least harm, Coleman said.
"For the overall impact, the Senate proposal would be obviously the most favorable to cities across Minnesota," he said. The Senate DFL pitch would offer no LGA cuts in the first year of the biennium, and cut planned inflationary increases the second year.
"The House position is even a significant improvement from the governor's position," he said. "The governor's proposal would increase taxes, and the question is who would increase taxes."
Pawlenty's LGA cuts would translate into $600 million in additional property taxes statewide, Coleman said. "That's been the pattern with the governor, which is he doesn't want to raise taxes but he has no problem with cities and counties across the state of Minnesota and school districts doing it."
Wolden said Bemidji's certified 2009 LGA of $3.28 million would be cut $320,922 the first year and $670,141 the second year under Pawlenty's proposal. The House DFL plan would take $108,959 the first year and $169,939 the second year.
The Senate plan would keep LGA intact the first year and reduce it $44,478 the second year.
"The governor is looking for a $78 million reduction in LGA for 2009 and $168 million for 2010," Wolden said. "That's significant reductions. The Senate and the House are making movements in the right direction by taking a look at having honest dialogue in saying that revenue has to be a part of that equation."
Both proposals offer some form of state tax increases, while Pawlenty says he will veto any tax increases.
The GOP governor has been critical of cities, saying they spend too much money on lobbyists such as the Coalition of Greater Minnesota Cities which could be spent on police and fire services.
The city of Bemidji is a member of the coalition.
"We don't have the opportunity to walk across the street and be at the Capitol ," Wolden said. "The people of greater Minnesota deserve to have their voices heard, thus the Coalition of Greater Minnesota Cities and the League of Minnesota Cities."
Teachers, school superintendents and school districts all have their own association representatives at the Capitol, he said, as well as counties. "The voices of the people of Minnesota need to be heard."
Wolden said the governor has his own staff embedded in state agencies to lobby for his positions. "He has taxpayer-paid lobbyists working for his office that get the governor's message into every nook and cranny of the Capitol."
Wolden also called Pawlenty's argument that cities have plush reserves a red herring, as cities only receive tax receipts twice a year and reserves become cash flow accounts.
The Senate bill would remove property tax levy limits, something Pawlenty insisted on in order to sign a 2008 tax bill.
"I'm of two minds," Coleman said. "We all talk about decentralizing control and of people living within their means and making choices on a local level, and at the same time dictating from a statewide level what cities can and should do.
"But the problem of taking levy limits off is ultimately the question of who's being put in the position of where they have to increase taxes," he added. "Just allowing us to raise taxes where we already have had significant property tax increases ... pushes the costs down to the local level. It's an unfair way to raise revenue."
Wolden's answer was short: "The cities in greater Minnesota have levy limits. They're called elections and they happen every two years."