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Cities, counties take $300 million unallotment hit

Sending $300 million of the state's budget problem to cities and counties, a stern Gov. Tim Pawlenty warned them to cut spending.

Pawlenty announced $2.65 billion in spending reductions Tuesday to finish balancing the state budget -- a chore he said he had to do unilaterally because the DFL-led Legislature sent him spending bills $3 billion more than expected revenues.

DFLers, however, called for at least $1 billion in new taxes, something Republican Pawlenty vetoed twice.

"All cities, especially large cities with lots of overhead, lots of operations, need to reduce their budgets," Pawlenty told reporters in a State Capitol news conference that included outstate reporters via telephone.

He said the city of Minneapolis, with one exception, "has been on an unbroken streak of 8 or so percent property tax increases every year in recent years."

Funding $50,000 artistic drinking fountains isn't a proper expenditure in a recession, Pawlenty said of Minneapolis. "When this thing is capped at 3 percent of your revenues, as defined as levy plus (state) aid, I think that is very reasonable.

"And for somebody to say that's too much, when almost every family, every taxpayer, almost everybody else is living on at least that much reduction in revenue ... they need to get their head out of the clouds and get into the real economy and economic circumstances that is the worst economic crisis since World War II," Pawlenty added.

Under Pawlenty's unallotment, cities and townships would get a $67 million reduction in state aid for fiscal 2010 and $133 million in fiscal 2011. No city's reduction would exceed 3.31 percent of annual aid plus levy the first year and 7.64 percent for the second year.

For Bemidji, it means the loss of $210, 493 in 2009 of Local Government Aid and $485,685 in 2010, according to the state Revenue Department. The cuts would come on top of an earlier unallotment in December to balance the current fiscal year's books which end June 30.

Over the past six years, Minnesota cities have lost $750 million in Local Government Aid, and as a result property taxes have increased more than 65 percent statewide, says the Coalition of Greater Minnesota Cities. The increase in property taxes, however, has fallen short of replacing the lost aid, so essential city services have also been cut back, it said.

"The effects of cutting aid from Minnesota communities are as predictable as a Minnesota winter -- every year we see higher property taxes and cuts to critical services," said Wadena Mayor Wayne Wolden, who is also president of the Coalition of Greater Minnesota Cities.

"It is not business as usual," said Pawlenty. "Cities across Minnesota need to keep flat and reduce their spending, not keep increasing the spending. My message is .. reduce."

The GOP unallotments include $100 million in County Program Aid, with $33 million the first year and $67 million the second year. Five counties with populations less than 5,000 would be excluded. The cuts amount to no more than 1.19 percent of aid plus levy the first year and 2.41 percent the second year.

It means $253,451 less aid the first year for Beltrami County and $514,582 less the second year.

"We have said that if aid is reduced for programs, we would then reduce the program," Beltrami County Administrator Tony Murphy said at Tuesday night's County Board meeting.

"We need to identify what those program cuts are, but it is less than what we had been primed for," he said.

The good in Tuesday's news was that Pawlenty apparently didn't ax payment-in-lieu of tax funds, which Beltrami County uses to provide public services in northern Beltrami County.

A number of human services programs took hits, however, such as the rescission of funds from the Personal Care Attendant program, which the Legislature limited to 310 hours a month an now Pawlenty to 275 hours a month.

Commissioner Jim Heltzer says he knows constituents in his district that use the service to help individuals with disabilities stay at home and independent. "The unallotments hit those who are most vulnerable," he said. "It forces us to make that up through property taxes."

Another cut with local impact is in critical access dental payments, which cuts the add-on payments to critical access centers for Medical Assistance and MinnesotaCare patients. But Jeanne Edevold Larson, executive director of Bemidji's new Northern Dental Access Center, said the reduction doesn't occur until April 2010, giving the 2010 Legislature to make adjustments, which she hopes.

"Poor people don't have lobbyists," said Dr. John Flor, founder of Main Street Dental M.A. in Blooming Prairie. "We see 15,000 Medical Assistance patients per year, and some come from up to 200 miles away to get access to our care. But we can't accept new patients without adequate funding. While our clinic will survive these cuts, others may not."

In higher education, Pawlenty cuts $50 million each from the University of Minnesota system and from the Minnesota State Colleges and Universities system, 3.6 percent reduction.

"Our higher education systems were expecting larger amounts," Pawlenty said. "I know they didn't want any reduction, but the amount they will see here is less than what they were expecting."

"While it may take a few days to understand the total impact of the governor's cuts, you can quickly see by looking at his spreadsheet that local governments bear the heaviest burden, while cuts to health care run a close second," said Rep. John Persell, DFL-Bemidji.

He cited the aid cuts to Bemidji and Beltrami County, saying they may lead to higher property taxes.

"Schools will be asked to wait for their state payments -- forcing many to take on short-term debt, while others will face layoffs, program cuts and even closures," Persell said. "Hospitals and nursing homes are also facing cuts that will raise prices and eliminate services.

"The governor likes to say that local governments, hospitals, and schools should be able to get by with a little less -- much like Minnesota's families," he added. "Added with the cuts already made this session, Tuesday's cuts amount to 10 percent of the budget -- not under 4 percent like he would like us to believe."

While most Minnesotans will see less government services and put hospitals and nursing homes in financial trouble, for just $9 a day new taxes on families making more than $300,000 would have avoided the unallotments, Persell said.