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Some fear tax bill means end of local aid

ST. PAUL -- Democratic lawmakers fear a bill the House passed Monday night is the beginning of the end of state aid sent to local governments.

With Republicans providing most of the votes, representatives approved the bill 73-59 lowering state aid and also cutting income taxes. Republicans rejected attempts to restore local government aid payments.

"I believe this bill will end Local Government Aid as we know it," said Rep. Paul Marquart, DFL-Dilworth, one of the Legislature's most outspoken local aid proponents.

As proof, he told about a comment by the chairwoman of a committee that deals with the aids. Rep. Linda Runbeck, R-Circle Pines, said in a March 16 committee meeting that she intends the bill to begin the phase-out of aid sent to cities, which receive more money than counties and townships.

In an interview, House Tax Chairman Greg Davids, R-Preston, denied that was the bill's intent.

"I do support what LGA is for," Davids said.

Duluth, St. Paul and Minneapolis would be weaned from LGA by 2015.

Other cities would receive about the same aid in each of the next two years as they did in 2010. Total local aid funding would be $873 million in the next two years, $260 million less than had been expected.

The House tax bill wraps together a variety of tax provisions with local aids, which are supported to help keep down property taxes.

The GOP plan would cut income taxes slightly, while Gov. Mark Dayton wants to raise income taxes on the wealthiest 5 percent of Minnesotans. Lower-income people would pay a few dollars a year less under the House plan, but richer taxpayers could save hundreds of dollars in taxes.

Most of Monday's nearly seven-hour debate centered on local aids.

Rep. Steve Drazkowski, R-Mazeppa, decried the use of money by Minneapolis, St. Paul and Duluth, saying Minneapolis spends money on things such as $1.75 million for public art. He said the cities can afford to pay their own way and the bill reduces spending on things "that citizens of Minnesota no longer can contribute to."

"They have many other funding sources," Runbeck said.

She added: "It is time to say the taxpayer deserves a break."

Such comments upset Rep. Kerry Gauthier, DFL-Duluth. He said Duluth, where he was a City Council member, would need to cut public safety spending 20 percent.

"God help anybody who needs to be saved," he said.

Runbeck said that Duluth "is a city that is struggling with mismanagement decisions made in the past. But have their really learned to be responsible for the taxpayer?"

She said Duluth "is sitting pretty good."

Gauthier said Duluth has cut all it can, and the House LGA cut would eliminate a third of the city's budget. He called the House action unfair and irresponsible.

Democrat Dayton's Revenue Department reported that the GOP bill would increase property taxes $900 million statewide, and Marquart said it would be twice as big in rural areas as cities. Taxes would need to rise, he said, to keep local programs in place after state aid is cut.

"Rural Minnesota, pay attention here," he said. "All I have heard all afternoon is a hit and a hit and a hit on rural Minnesota."

Dayton has said he opposes the Republican tax bill and is expected to veto it if the measure reaches his desk.

The House bill reduces a renters' property tax credit and eliminates the Sustainable Forest Act that was designed to help restore forests. It requires the state revenue commissioner to negotiate a deal with Wisconsin restoring the ability for people who live in one state and work in the other to file just one state tax return.

Cloquet, Hutchinson and Fergus Falls would be allowed to establish a 0.5 percent sales tax for sewage facilities. Hermantown voters could approve raising their sales tax to 1 percent.

Senate Republicans take a slightly different approach and do not include an income tax cut. Senators are expected to debate their bill later this week.

Don Davis works for Forum Communications Co., which owns the Bemidji Pioneer.