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LGA reform bill heard in House committee

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news Bemidji, 56619

Bemidji Minnesota P.O. Box 455 56619

BEMIDJI – A bill that would reform the way the state sends Local Government Aid (LGA) to cities like Bemidji was heard in a legislative committee Wednesday night.

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The bill, authored by Moorhead DFLer Rep. Ben Lien, went through more than an hour of debate in the property and local tax division of the House taxes committee before it was laid over for possible inclusion in the division report.

Representatives from three Minnesota city organizations testified in favor of the bill, a rare sign of cooperation on LGA issues between greater Minnesota and the metro.

“We support in particular that it is a simpler formula, that it reduces volatility year over year and that it has an inflation factor,” said Betsy Hodges, president of the League of Minnesota Cities and a Minneapolis city councilwoman.

The bill also adds $80 million to the LGA program in 2014, which has seen cuts in recent years that city leaders across the state blame for rising property taxes and reduced services. Gov. Mark Dayton included the additional $80 million in his proposed budget as well, which would bring the total annual appropriation to about $506 million.

According to research by state House staff, Bemidji would receive more than $3.2 million under Lien’s proposal in 2014, about $305,000 more than it will receive this year and $440,000 more than its projected to get under current law in 2014.

LGA is one of Bemidji’s biggest sources of revenue, along with property taxes.

“This is going to be a good bill for us,” said Bemidji Mayor Rita Albrecht, who was at the Capitol Wednesday.

The proposed formula breaks down cities into three groups based on population. Bemidji would fall into the “large city” category, with a population more than 10,000. Its LGA allocation would be dependent on jobs per capita, percent of housing built before 1940 and percent of house built before 1940 and 1970.

“Under the current law, there are far more factors which made it very difficult for cities to plan their budgets,” said Chris Henjum, an analyst with the Coalition of Greater Minnesota Cities.

Albrecht said factoring in jobs per capita is good for Bemidji, where many commute from out of town for work and use city services.

Some in Wednesday night’s committee, however, had concerns with the bill.

Rep. Pat Garofalo, R-Farmington, said the way the bill compensates for inflation will create automatic spending increases that future legislators will have to deal with.

“What the subsequent legislatures will have to do is take appropriations from other areas of the budget, put it into LGA, or we’re going to have to raise taxes,” Garofalo said. “We’re baking into the brownies for future budget forecasts automatic spending increases that are faster than personal income growth.”

Rep. Jerry Hertaus, R-Greenfield, also questioned the bill’s fairness to cities that don’t receive LGA. And Rep. Linda Runbeck, R-Circle Pines, called LGA a “spending enabler” for cities.

But Rep. Paul Marquart, DFL-Dilworth, said increasing LGA dollars is about property tax relief.

“We are reversing the trend that has been set by legislatures where they have balanced the budget on the backs of property taxpayers,” Marquart said.

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