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'State compromise in order': Legislators debate LGA cuts, revenue increases at Bemidji City Council work session

Sen. John Carlson, R-Bemidji, and Sen. Rod Skoe, DFL-Clearbrook, appeared eager and willing to compromise in order to end the state government shutdown.

During a Bemidji City Council work session Monday, the two legislators walked in late to the meeting after apparently discussing issues on which to compromise.

"You'll be happy to know Rod and I actually settled this budget already," Carlson said, chuckling.

"From my perspective, it is extremely important we get this solved on a number of levels," Skoe added.

The government shutdown enters its 13th day Wednesday, the longest in Minnesota history and the longest of any state in at least two decades. DFL Gov. Mark Dayton and the Republican-controlled Legislature have not yet come to an agreement on how to fix the state's budget deficit.

"It's affecting not just the government, but it's affecting Minnesota businesses and their ability to make money," Skoe said. "If a couple months drift by...the cuts are going to be greater when they occur. Timeliness is important."

Skoe added, "I think compromise is in order for everybody. I personally think if leadership would let stuff come to the floor, we could pass it."

Carlson said he and Rep. Dave Hancock, R-Bemidji, agreed philosophically on how the state should spend money. Pragmatically, he added, they may disagree.

"I just don't think we can sit in a situation where we can't buy a fishing license, that we can't get foresters in the woods so wood can get into the lumber yards," Carlson said. "I think, pragmatically, we're going to have to have to have more revenue."

However, Carlson added, "I am not willing to agree to an income tax increase."

Carlson said he would accept increasing taxes on "voluntary" items such as cigarettes, alcohol and gambling, which he said he and Skoe discussed before the city council meeting.

"In my mind, that's acceptable," Carlson added. "Income tax, you don't have a choice. But if you smoke, drink, gamble ... I don't know why we would limit someone from wanting to volunteer their money."

Hancock disagreed with Carlson, asking him, "So you would take a legal activity, and you would penalize a person that has a tobacco habit or alcohol habit, and say 'I'm going to make them pay through the roof so that we can have benefits for the rest of society?' Is that an equal taxation?"

Carlson replied by asking Hancock, "Is it equal that the rest of society pays for the problems that their addictions cost?"

Councilor Rita Albrecht asked Hancock and Carlson if they had any influence with their caucus in resolving budget issues.

Hancock responded by saying differences in semantics were among the causes of the budget stalemate.

"We're saying 'not a penny more' on spending, because we simply cannot condone having a tax increase that pays to fund an unsustainable funding growth in government," Hancock said.

Tim Flaherty, a lobbyist for the Coalition of Greater Minnesota Cities, to which Bemidji is a member, was also at the city council work session.

Flaherty said the CGMC's position was that it is better to raise state revenue than to shift the burden onto local property tax payers.

One of the main concerns of the CGMC is lobbying for Local Government Aid to cities. LGA was designed to help cities that have greater needs than what could be funded by property taxes, such as regional centers like Bemidji.

Flaherty said LGA currently hangs in limbo at the State Capitol as new majorities and the governor quarrel.

Hancock explained he knows of some cities in greater Minnesota that do not want LGA.

"I've had people come up to me and say 'We didn't figure we were going to get any LGA this year so we planned accordingly,'" he said. "The idea that rural communities in greater Minnesota need help with funding their infrastructure and basic public safety, which is the purpose of LGA, is vital. But we need to do it in a manner that rewards good stewardship of the local money."

City Manager John Chattin told Hancock, "If you would make the 53 percent of our tax capacity in Bemidji taxable, you can have your LGA. But 53 percent of our property is nontaxable."

"What we've done for four-and-a-half months, we've put together a budget that basically, in this point and time, is almost a worthless piece of exercise," Hancock said. "We're arguing about what are we ultimately are going to spend."

So far, Flaherty said, the CGMC has been successful in getting bipartisan support at the Legislature for LGA.

"We're saying, 'Solve this budget problem, raise state revenue and don't shift the problem onto property tax payers,'" Flaherty said.

A Ramsey County judge issued an order in late June directing the state's commissioner of Management and Budget to ensure that cities receive LGA appropriations on July 20 as scheduled.

However, Flaherty said, if the state runs out of money, it cannot make the payments that are required by law.

He added that lawmakers have proposed increasing homeowner property tax refunds by $29 million, which the CGMC would "really have a problem with."

"Once you get into this 'We're not going have any more revenues,' it is really greater Minnesota that takes the biggest hit on this," Flaherty said. "Under the legislature's budget, property taxes would go up 9.4 percent in greater Minnesota."

Flaherty said the CGMC will continue to lobby to keep the state's LGA funding at the 2011 level, but added that he was not sure how long the budget stalemate could continue.

"I think we're in jeopardy until it gets resolved," he said. "My guess is would be at least until September. As the problems continue to grow from the shutdown, then there will be more pressure to resolve it one way or another."