Two recently introduced bills seek to reduce – or eliminate – Local Government Aid (LGA) based on sales tax revenue. The first, HF 3830 (authored by Rep. Cal Bahr, R-East Bethel) reduces a city’s LGA over time based on their local sales tax. As cities know, local option sales taxes are not a substitute for LGA since they are dedicated to specific capital projects, while LGA is used for general operations, investments and restraining property taxes.
The second LGA bill, HF3892/SF 3518 (authored by Rep. Jerry Hertaus, R-Greenfield and Sen. Mark Koran, R-North Branch), would eliminate the LGA and fiscal disparity program and re-direct sales taxes to cities and school districts. Specifically, the revenue raised by a sales tax of 1 percent on all sales goes to a new school/municipal trust account. Every city qualifies for aid, but a city’s aid would be determined by a county’s share (the amount needed to make payments multiplied by how much sales tax revenue the county contributes) multiplied by the city’s population. The higher the population and sales tax revenue, the more aid a city would receive – more than likely benefiting populous metro cities.
The CGMC will continue to monitor these bills and others to ensure that Greater Minnesota cities can rely upon a strong LGA program into the future. If you have any questions about LGA issues, please contact Bradley Peterson at firstname.lastname@example.org.