Small cities anticipate LGA funding delay

Just as the Legislature is about to begin a special session to settle the state’s budget, the revenue department has issued a release stating that Local Government Aid (LGA) checks–scheduled to be issued tomorrow–will be delayed until at least July 27.

I did a quick check of some small and medium-sized cities across the state, and it seems that most can handle the delay. Says Steve Peterson, mayor of Virginia, which relies on LGA for about a third of its $12 million budget, “It won’t affect us. It’s only a week. We can get by with that. As long as it’s not any longer than that.”

Gary Carlson of the League of Minnesota Cities did note that some cities have debt payments due Aug.1 and could be relying on the state checks for those.

Perhaps more unsettling for some cities, the Department of Revenue release suggests that the payments “will be revised to reflect the new 2011 levels.” The LGA payment amounts that will be approved by the Legislature and governor are unknown at this point.

Without having seen details, the League of Minnesota Cities is anticipating that the amounts could reflect those included in a GOP bill vetoed by Governor Dayton earlier this year. That would mean most cities would receive less than they were promised for 2011, likely the same as they received in 2010.

When cities set their 2011 budgets last December, they had as a guide state-determined LGA “allotments” to be paid in two installments — July 20 and Dec. 26. Those 2011 allotments were the same as the amount originally scheduled for 2010, but the state ultimately cut 2010 payments back.

All the uncertainty has some small city mayors and administrators hoping for the best but preparing for the worst.

Don Rasmussen, mayor of Long Prairie, which could see its 2011 allotment cut from $845,000 to $736,000, says his city can weather what comes. “We’ve been pretty frugal with what’s going on here and we’ve been more that way in the last couple of years with all the uncertainty,” he says. “We have reserves.”

“I’m always optimistic, adds Rasmussen, who is taking a wait and see attitude. “You have to worry about it, but if you sit back and let things you don’t know about for sure get to you, you are hurting.”

Mark Erickson, the city administrator for Winthrop–which could see its LGA amount go from $454,000 to $394,000–is less sanguine. He says his city would dip into capital reserves or maybe even raise property taxes.

“LGA represents almost half our budget,” says Erickson, adding that Winthrop has already cut its city staff from eight people to five. “We have no place else to cut. They cut LGA and we raise property taxes. It’s a pass along tax. It’s not solving the financial problems. It’s just passing the buck.”

For background on the financial dilemmas Minnesota cities have been facing for some years, see our Ground Level project, “Cities in Crisis.”