A ‘different approach’ for local aid

Lunch was already served by the time Gov. Mark Dayton ambled into the conference room at the Crowne Plaza a few minutes after noon on Thursday. The governor passed seemingly unnoticed around the assembled crowd for the Joint Legislative Conference for Cities, Counties, Schools and Townships, and, after a few personal greetings and a short introduction, made his way to the podium.

Dayton received a warm welcome, and more than a few local government officials hopped to their feet for a standing ovation.

The same description — tardy, but well-received — would fit if local governments wind up getting what they want this session.

Legislators, especially Democrats, and the governor have highlighted the boost for local government aid (LGA) as one of the triumphs of the previous Legislature. Dayton noted the accomplishment again in his speech to the conference, citing the 2013 deal that restructured the LGA formula and added $120 million — $80 million for cities, and $40 million for counties — to the base funding.

In a sly reference that drew laughs, Dayton told local officials he learned some people disapproved of the formula “a couple months before last year’s election,” an allusion to Republican candidate Jeff Johnson’s threat to pull LGA money from Minneapolis and St. Paul and redirect it toward outstate communities.

The 2013 increase, which brought the total LGA output to $507 million for calendar year 2014, was the first uptick in that spending after a decade of cuts.

Dayton now seems comfortable leaving that formula intact, and is instead advocating a “different approach” in his next budget, focusing on the street, highway and transit funding needs of Minnesota’s communities. Dayton’s transportation increases would add $158 million in annual aid for counties and about $50 million for cities. Conceding that the funding formula in place gives the advantage to counties, and leaves cities under 5,000 people out entirely, Dayton acknowledged that the formula might need to be “adjusted accordingly.”

That’s nice, cities say — but not enough.

“Of course, we all have our wish list,” said Gary Carlson, chief lobbyist for the League of Minnesota Cities. “The message I’ve gotten [from cities] is, ‘we need general money for operations, and we need money for roads.’”

That is, the state’s cities’ view of dedicated road money versus direct state aid is not a matter of either/or, but both — and then some.

A rare coalition of local government advocacy groups, including LMC, the Coalition of Greater Minnesota Cities (CGMC), Metro Cities and the cities of Minneapolis and St. Paul came together to back the 2013 formula rewrite and funding increase. This year, the same groups are aligned once more, and again seeking more money for the LGA base.

In a Wednesday hearing of the House Property Tax and Local Government Finance Committee, Rep. Paul Anderson, R-Starbuck, presented a bill that would add some $45 million to LGA in the next budget. Advocates argue that’s a small hike relative to the base increase in 2014-15 budget, and a drop in the bucket in light of a $1.9 billion surplus.

Anderson knows his House Republican caucus aims to “return most of, or a big part of that surplus” through tax reductions, but said LGA money is a vital revenue source for Greater Minnesota districts like his own. City budgets shrunk during the economic recession, and LGA money has helped some communities rehire police officers whose positions had been cut.

“There are 24 cities in my district,” he said. “Most of them are fairly small, and LGA is an important part of their city budgets.”

Anderon’s bill, drafted with assistance from CGMC, has attracted a handful of DFL House co-authors from second-tier cities, and the Senate file authored by Sen. Lyle Koenen, DFL-Clara City, has a mix of rural, urban and outstate supporters. Standing in the way of both, though, are the chief leaders of the principal committees that would first approve an LGA bill.

One possible bottleneck lies on the Senate side, where Sen. Ann Rest, DFL-New Hope, chairs the Senate Tax Reform Subcommittee. Carlson recalled a meeting prior to session where Rest expressed little interest in adding more money to LGA, while Sen. Rod Skoe, DFL-Clearbrook, offered little in the way of support or opposition. The Senate file has not yet been given a hearing.

In the House, as Anderson and others testified in support of his bill, the man wielding the gavel was Rep. Steve Drazkowski, R-Mazeppa, who said prior to the session that local governments should be called upon to spend within their means. Anderson knows about Drazkowski’s generally skeptical view of local budgets, but said the two had been talking throughout the session on how to get more money to at least some units of government.

Anderson mentioned the same deficiency in the funding mechanism for roads as Dayton did, saying his own district contains “a lot of” towns with fewer than 5,000 residents. “We’ve discussed maybe targeting some of this LGA to go to that area in a transportation-type use,” Anderson said.

The LGA increase bill was laid on the table for possible inclusion in a division report, meaning Drazkowski did not have to take a position yet. But, according to Carlson, the committee chair told an afternoon panel at the local government conference that he “did not expect to see a lot happening” with respect to LGA in his division report. Though that phrasing could be open to different meanings, Carlson took it as a sign that LGA funding would stay flat.

“We won’t have that [report] for weeks yet, but having listened to his comments, I think he’s not going to do any damage to the program,” Carlson said.

That, at least, would be a relief for people like Patricia Nauman, executive director of Metro Cities, a lobbying arm for 86 cities — including Minneapolis and St. Paul —  in the seven-county metropolitan area. Nauman is also pleased about the relative silence about any change to the funding formula agreed to in 2013, which increased the weight given to population and brought more LGA money to the Twin Cities area.

“The old formula was a little geographically disparate,” Nauman said, “and our goal was to get some of that reduced.”

In 2016, the current formula would designate about $78 million for Minneapolis and $62.3 million for St. Paul. Anderson’s bill, if passed, would bump those figures to $80.6 million and $65.4 million, respectively. Neither amount, both Carlson and Nauman observed, comes close to restoring the state support that once existed: In 2002, for example, the Minneapolis budget received $111 million in direct aid.

Of course, the focus on transportation from Dayton and both legislative chambers this session may only lessen the chances that Democrats and Republicans come to an agreement. If the two sides remain deadlocked, even the governor’s pledge of money for local roads — “which still needs some tweaking, and fine-tuning,” he said Thursday — would be in jeopardy.

“If it gets shot down,” Dayton told the conference audience, “I’m going to go back to the drawing board, in terms of giving you the additional resources you need to operate for the next two years. But I’d rather see it go this way.”

Whether it works or not, the same powerful coalition of local government groups is still driving for more direct money. Nauman said she is still “optimistic” the governor might find room in his supplemental budget for LGA money, while Carlson reflected on the program’s popularity, especially in a surplus.

“Usually, we do get a little something in the LGA pot when the dust settles,” he said.