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Special Session

For Immediate Release
Contact: Julie Liew, jlliew@flaherty-hood.com
PDF version

ST. PAUL—It took years of advocacy by city leaders and a late-night special session to get there, but funding for the Local Government Aid (LGA) program is finally being restored to its 2002 high-water mark.

The tax bill passed by the Legislature in the wee hours of Saturday morning contains a $26 million increase in LGA for 2020, followed by an additional $4 million boost in 2021, bringing total funding for the program to $564 million. The bill is now headed to Gov. Walz’s desk. He is expected to sign it, along with other key budget bills, on Tuesday.

“Our No. 1 priority for this year was to get LGA funding back up to the 2002 level,” said Ron Johnson, who serves as president of the Coalition of Greater Minnesota Cities (CGMC) and is a member of the Bemidji City Council. “I’m ecstatic that the Legislature and Governor were able to work together to make that goal a reality. Cities all across the state, and especially in Greater Minnesota, are going to benefit from this important investment.”

This increase has been a long time coming for the nearly 90% of cities in Minnesota who rely on LGA to help pay for city services (such as public safety, street maintenance, parks and libraries) and restrain property taxes. While LGA has received occasional boosts in funding in recent years, cities have still been playing catch-up since drastic cuts to the program in the mid-2000s.

“As city officials, we work hard to keep our city budgets and property tax levies in check, but it is difficult when costs for everything from employee health insurance premiums to construction materials continue to rise,” Johnson said.

“A great thing about LGA is that it gives cities the flexibility to make investments wherever they are most needed,” he added. “With this bump in funding, some cities will be able to hire an additional firefighter or replace a beaten up old snowplow, while others might use the extra LGA to hold down their levies.”

Bradley Peterson, executive director of the CGMC, credited tenacious city leaders, Gov. Walz, House Tax Chair Rep. Paul Marquart (DFL-Dilworth) and other state lawmakers for their hard work in getting the LGA increase through the Legislature this year.

“Successes like this have many parents,” Peterson said, noting that LGA is a prime example of an issue where the divided state government was able to reach a compromise for the good of the state.

In addition to LGA, there were other bright spots for Greater Minnesota in the special session.

The Legislature approved funding to help address the child care shortage in Greater Minnesota, including $750,000 to be divided between the six Minnesota Initiative Foundations for child care provider training and business assistance and an additional $750,000 for child care grants, of which at least 60% must go to Greater Minnesota. It also passed $40 million for rural broadband, $18 million for clean water infrastructure grants, $3.5 million for the Greater Minnesota Business Development Public Infrastructure Grant Program and $1.35 million for the Greater Minnesota Job Training Incentive Program.

However, there were some major disappointments in the session as well.

After legislative leaders were unable to agree on adopting any new revenues for transportation, the Legislature passed a pared down transportation bill that included no funding for small-city streets and no additional funding for the Municipal Street Aid or Corridors of Commerce programs.

And perhaps the biggest disappointment of the session was the failure to pass a bonding bill. Johnson said city leaders were counting on a bonding bill to help pay for critical infrastructure needs such as repairs to wastewater treatment plants and other city facilities, road improvements and new or expanded child care facilities.

“In some ways this was a bittersweet legislative session for Greater Minnesota overall,” Johnson said. “We are pleased with the LGA increase, but the lack of a bonding bill or comprehensive transportation bill means many important projects will have to be pushed aside for at least another year.”

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The Coalition of Greater Minnesota Cities is a nonprofit, nonpartisan advocacy organization representing 97 cities outside of the Twin Cities metropolitan area. The Coalition educates legislators about issues important to Greater Minnesota. Visit the CGMC online at greatermncities.org and follow us on Twitter @greatermncities.

The Legislature is back in session! Governor Walz called a special session for 10 a.m. Friday with the goal of passing the state budget. While the Governor and legislative leaders have expressed preference for a one-day special session, it remains unclear whether it will stretch into the weekend. Throughout the week committee chairs, legislative leaders and nonpartisan legislative staff were hard at work hammering out the final details on the big-ticket budget bills. By Thursday evening most of the conference committees had completed negotiations and released proposed bills that will be voted on by the full House and Senate during the special session.
 
Here is where things currently stand on the CGMC’s top issues:

  • Local Government Aid – The proposed tax bill includes a $26 million increase in LGA for 2020, and an additional $4 million increase the following year, restoring LGA to its 2002 level starting in 2021.This document from MN House Research shows how much LGA each city would receive in 2020 under the bill. In addition, the bill includes a provision that says that no city will receive less LGA in 2020 than they received in 2019.
  • Clean water infrastructure – We are waiting to see if our request for $67 million for clean water grant and loan programs will be included in the bonding bill. However, the proposed Legacy bill includes $18 million for the Point Source Implementation Grant Program, which helps cities pay for water infrastructure projects.
  • City streets – The proposed transportation bill includes no funding for small-city streets (cities under 5,000 in population) and no additional funding for the Municipal Street Aid program for cities over 5,000 in population.
  • Corridors of Commerce – The transportation bill does not include any additional funding for Corridors of Commerce, but it keeps the $25 million/year ongoing appropriation for the program which had been potentially on the chopping block.
  • Child care grants – The proposed omnibus jobs bill includes $750,000 to be distributed between the six Minnesota Initiative Foundations (MIFs) for child care provider training and business development assistance. The bill also includes $750,000 for the Department of Employment and Economic Development child care grant program, of which at least 60 percent must go to Greater Minnesota.
  • Child care facilities grants – This issue remains up in the air as the Legislature attempts to craft a bonding bill.
  • Greater Minnesota Business Development Infrastructure Grant Program (BDPI) – The BDPI program is typically funded mostly through the bonding bill, so we are still waiting to see if it will be included. However, the proposed jobs bill includes $3.574 million ($1.787 million per year for two years) for the program.
  • Job training – The jobs bill includes $1.35 million for the Greater Minnesota Job Training Incentive Program.
  • Broadband – The agriculture & housing finance bill includes $40 million for the Border-to-Border Broadband Development Grant Program.

Once the special session has concluded, we will provide more in-depth analysis on how Greater Minnesota priorities fared at the Legislature this year.

After blowing past their own self-imposed deadlines, Governor Walz and legislative leaders House Speaker Melissa Hortman and Senate Majority Leader Paul Gazelka finally reached an agreement on the state budget Sunday evening. See their signed agreement.

Although Monday was the final day of the regular session — per the State Constitution — a special session will be required for the Legislature to complete its work and pass bills. Governor Walz and legislative leaders have indicated preference for a one-day special session to be held this Thursday, but the exact timing and duration of the special session are still up in the air.

As all three stated during their joint press conference Sunday evening, the agreement reflects a compromise on all sides with no clear “winner.” The two major sticking points in negotiations were the gas tax (Governor and House wanted a 20 cent increase; Senate wanted no increase) and health care provider tax (Governor and House wanted to extend the 2% provider tax set to sunset this year; Senate wanted to eliminate it). Ultimately, the final agreement included no gas tax increase and a 1.8% provider tax with no sunset.

While there is an agreement on the broad budget numbers, the various conference committees were tasked with hammering out the details by 5 p.m. Monday. Reportedly most of them failed to meet that deadline. There is talk that now the bills will be pulled out of conference committee and the final details will be decided between Governor Walz, legislative leaders and the respective committee chairs.

What does it all mean for Local Government Aid (LGA)?

The prospects for an LGA increase — which, if there is one, will be included in the tax bill — are still up in the air.

The tax bill agreement includes only three specific items: a reduction in the second-tier individual income tax rate from 7.2 percent to 6.8 percent, $20 million for the Minneapolis Employees Retirement Fund and a $50 million reduction in the state general levy, which is a statewide property tax that primarily applies to commercial-industrial property. All other issues were left up the conference committee to decide.

The tax bill was given a $0 target, which means that any increase in tax revenues must be matched by an equivalent reduction in revenues or increase in tax aids and credits (e.g. LGA). Federal conformity, Minnesota’s response to the 2017 federal tax overhaul, will play a significant role in shaping what a final tax bill looks like as the plans put forth by Governor Walz, the House DFL and the Senate GOP all generate additional revenue that could be used to pay for other priorities within the tax bill, such as increases to LGA or an expansion of the Working Family Credit.

After the budget agreement was announced Sunday night, we quickly sent out a news release from CGMC President Ron Johnson reiterating that Greater Minnesota communities are counting on the Legislature to pass a $30.5 million LGA increase this year. The CGMC also sent a letter from Ron to all Greater Minnesota legislators arguing that an LGA increase is necessary to provide balance to the tax bill, because 73 percent of the property tax relief provided by cutting the state general levy will go to property located in the metro.

What about a bonding bill?

Governor Walz and the legislative leaders have agreed to a $500 million bonding bill, which includes $440 million in general obligation bonds and $60 million in housing infrastructure bonds. However, the details of what will actually be included in said bonding bill have yet to be determined. From the CGMC perspective, we are hopeful for dollars for clean water infrastructure (PFA $$$), the Greater Minnesota Business Development Infrastructure grant program and child care facilities grants. Several of our member cities also have important projects vying for funding.

It is important to note that unlike other bills, the bonding bill requires a supermajority to pass. That means that it will not pass in either the House or Senate unless some legislators in both chambers vote across party lines. In comments made to reporters following announcement of the budget deal, House Minority Leader Kurt Daudt threw some cold water on the idea of any House Republicans voting for a bonding bill. However, it is quite possible that some House Republicans may choose to break from their party in order to get funding for important projects in their districts.

And CGMC’s child care proposals?

At this point there is no news to report on our two child care priorities: funding for the Minnesota Initiative Foundations (MIFs) for provider training & business assistance and bonding money to build or expand child care facilities. The MIFs proposal is still being considered as part of the omnibus jobs bill, and child care facilities grants are part of the ongoing bonding bill discussions.

Any hope for transportation?

The gas tax was one of Governor Walz’s highest profile proposals this session. He talked about the need for new transportation revenues on the campaign trail and reiterated that commitment the day after his election as governor. This session’s House transportation bill was particularly promising for CGMC priorities. It included new funding for Corridors of Commerce, significant new funding for MSA cities, and a permanent, dedicated funding stream for small cities. When the final budget deal was reached, however, all of those priorities ended up on the cutting room floor.

For cities with populations greater than 5,000, the status quo will hold. With no additional funding coming into the transportation formula, larger cities will not see increases through the municipal state aid formula.

For small cities, the jury is still out, but the path forward is difficult. Without significant new funding for transportation and a relatively small general fund target for transportation, it is difficult to see how the House and Senate come up with a compromise plan that isn’t an abject failure for small-city street funding.

Further, without new funding in the transportation system, significant investments in Corridors of Commerce may not be possible this session. Since it appears that a comprehensive transportation package is now off the table for this year, the CGMC will shift in its focus in the upcoming special session to maintaining the $25 million/year base appropriation for Corridors of Commerce, which the Senate has proposed eliminating. While the Corridors of Commerce program is not perfect and could use some tweaks in the way it scores projects for funding consideration, it remains one of the few mechanisms for funding critical highway projects in Greater Minnesota.

How will the special session play out?

The legislative leaders have hinted at holding a one-day special session on Thursday. Accomplishing that in one day would require suspending the normal procedural rules in each chamber which require action on a bill take place over multiple days. A vote to suspend the rules requires a three-fifths majority, which would require six GOP votes in the House. The House GOP caucus has threatened to vote against such a motion. Failure to suspend the rules means a special session could take several days to finish.

It’s important to note that while there is a global agreement between the Governor, Speaker Hortman and Sen. Gazelka, there are still 199 other legislators to consider — some of whom may not be happy with the terms that were agreed upon or the “cone of silence” that surrounded the negotiations. So while there are just hours until today’s midnight deadline for the regular legislative session, the Legislature’s work remains far from over.

As the special session plays out, CGMC staff will be busy following all the action at the Capitol and continuing to advocate for Greater Minnesota priorities.

Questions?

If you have any questions, please contact CGMC Executive Director Bradley Peterson at bmpeterson@flaherty-hood.com or 651-225-8840.

For Immediate Release
Contact: Julie Liew, jlliew@flaherty-hood.com
PDF version

Below is a statement from CGMC President and Bemidji City Council Member Ron Johnson on the state budget agreement:

“I’m pleased to see that the Governor and legislative leaders have come to a bipartisan agreement on the state budget. As lawmakers continue to hammer out the details, I want to reiterate that there needs to be a $30.5 million increase in Local Government Aid in order for this session to be considered a success for Greater Minnesota. This has been our No. 1 priority since the first day of the session and we will continue to lean on our legislators to make it a reality.

“Gov. Walz campaigned on increasing Local Government Aid and leaders in the House have been vocal in their support for boosting the program. As we move into a special session, it is vital that they continue to fight for communities throughout the state and pass a $30.5 million LGA increase this year.”

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On Tuesday, Gov. Dayton announced he would sign all of the budget bills passed by the Legislature, as well as the bonding and tax bills. Nonetheless, significant controversy continues. Here’s a play-by-play of the final days of the special session, including the CGMC perspective on what may come:

Special session marked by frustration
Before the Legislature had even sent Gov. Dayton all of its budget bills, loud protests rang through the Capitol urging the Governor to “veto everything.” Activists were angered by the perception that Republican leadership in the Legislature had sneaked controversial provisions into a number of bills after reaching an agreement with Gov. Dayton.

Late in the week, it seemed that the tax bill (which includes a $15 million LGA increase) was a possible veto target. Gov. Dayton and other Democrats, including Senate Minority Leader Tom Bakk, expressed concern over the high cost of the GOP’s tax bill, which comes in at $650 million in the first biennium and grows substantially thereafter. Sen. Bakk urged Gov. Dayton to veto the bill to avoid future deficits.

Legislature tries to tie Dayton’s hands
To pressure Gov. Dayton into signing the tax bill, legislators inserted a provision into a state government funding bill without the Governor’s knowledge. The provision would have withheld all funding for the operation of the Department of Revenue unless Gov. Dayton signed the tax bill. On Tuesday, House Speaker Kurt Daudt acknowledged to reporters the provision was placed in the bill behind Gov. Dayton’s back. When asked if the Governor knew about the provision in advance, Speaker Daudt replied, “He found it eventually.”

Dayton signs budget bills, but responds with his own maneuvers
In response to the Legislature’s maneuver, Gov. Dayton wrote to leaders, “I consider this provision … to be a reprehensible sneak attack, which shatters whatever trust we achieved.” Angered by the perceived slight, Gov. Dayton signed all of the budget bills, but used his line-item veto power to strike any new funding for the operation of the Legislature itself. Gov. Dayton indicated that vetoing the Legislature’s funding was a move to bring legislators back to the negotiating table. Arguing they had not negotiated in good faith, the Governor wants to re-open negotiations on items in the tax bill including tax freezes on cigarettes and the state commercial/industrial property tax.

Rather than return to the negotiating table, the Legislature is likely to sue the Governor on constitutional grounds. The courts will be asked to determine whether the Governor in fact has the authority to use his veto pen to eliminate funding for another, co-equal branch of government.
 
The CGMC perspective
Regardless of how the controversy plays out, provisions in the tax bill that benefit CGMC members cities, such as the $15 million LGA increase and LGA formula fixes, are not likely to be impacted. A lawsuit between branches of government would be on the narrow issue of the Legislature’s funding. In the unlikely scenario that negotiations do restart, they will likely be limited to just a few controversial items. The CGMC will continue to monitor developments.

Final outcome of CGMC priorities
For a brief overview of how the CGMC’s top legislative priorities fared this session, please see this 2017 Outcomes Chart.

The House and Senate, purportedly in agreement with Gov. Dayton, passed a tax bill today that comes in around $648 million for the 2018-19 biennium. The bill includes a permanent $15 million increase in Local Government Aid. To see a preliminary estimate of how your city will do with this increase, click HERE for the CGMC’s updated LGA run.

We want to extend a sincere THANK YOU to everyone who responded to our numerous Action Alerts by contacting your legislators and the Governor about the need for an increase in LGA funding. We were hoping for a larger increase, and we will continue the fight, but it was thanks to your help that this final number is higher than previous proposals from both the House and Senate.
 
Here are links to the SPREADSHEET and BILL LANGUAGE for the tax bill.

Last night’s legislative deadline sailed by without action on several key bills, including the tax bill (which includes Local Government Aid funding). Governor Dayton immediately called a special session at 12:01 a.m. this morning, which means legislators are continuing their work to pass budget bills. There is still hope for an LGA increase, but we need your help!

Take action now!
If we are going to secure an LGA increase, it is imperative that you contact Governor Dayton, House Speaker Kurt Daudt and Senate Majority Leader Paul Gazelka by 3 p.m. TODAY. Tell them that the final tax bill must include a permanent $20 million increase in LGA per year over the next two years.

Contact info

Questions?
If you have any questions about LGA or the legislative session, please contact Bradley Peterson at bmpeterson@flaherty-hood.com or 651-259-1911.

Below is statement from Coalition of Greater Minnesota Cities President and Alexandria Mayor Sara Carlson on Governor Dayton’s announcement that he has laid out the terms under which he would call a special session. A PDF version of Carlson’s statement is available here.

“We strongly support Gov. Dayton’s call for a special session. In particular, we are pleased to see that his proposal includes several top priorities for Greater Minnesota cities, including a $20 million increase in LGA, $133 million for clean water infrastructure grants and loans and funding for numerous bonding projects throughout the state.

It appears the ball is now in the legislative leaders’ court. We are actively encouraging Greater Minnesota city leaders and residents to contact the legislative leaders and their own legislators to urge them to support Governor Dayton’s special session terms. Minnesotans deserve action on the tax and bonding bills, as well as a quick resolution to their concerns about rising health insurance costs. The legislative leaders should support the Governor’s plan for special session so our communities and the state can move forward.”

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Earlier today, Governor Dayton sent a letter to legislative leaders laying out the terms under which he would call a special session to address taxes, bonding and concerns about health insurance costs. We are pleased that the Governor’s proposal includes our top priorities for taxes and bonding:

– A $20 million increase in LGA payable to cities in 2017
– $133 million for clean water infrastructure grant and loan programs
– $12 million for the Greater Minnesota Business Development Public Infrastructure (BDPI) Grant Program
– …plus funding for bonding projects in several CGMC member cities

The ball is now in the legislative leaders’ court. If the leaders agree to his terms by this Thursday, the Governor has stated that he will call a special session to be held on Dec. 20.

Take action now!

As a Greater MN city leader, it is imperative that you call the four legislative leaders and your own legislators TODAY and tell them to support Governor Dayton’s special session terms so that Greater Minnesota communities can benefits from an LGA increase and move forward with key construction projects.

Contact info

Questions?

If you have any questions, please contact Bradley Peterson at bmpeterson@flaherty-hood.com or 651-259-1911.

The Legislature and Governor missed an enormous opportunity in 2016 by failing to pass tax and bonding bills. Without a tax bill, cities will not receive a much-needed $20M increase in LGA. Without a bonding bill, Greater Minnesota communities won’t receive funding for wastewater infrastructure and other important projects. With a recently announced $1.4B surplus, the state is on firm financial footing‒it’s now up to our state leaders to take action.

There are signs that legislative leaders will revisit the 2016 tax and bonding bills in a legislative session soon, which would significantly benefit Greater Minnesota. For more on the CGMC’s position, read this press release.

Take action now!

As a Greater MN city leader, it is imperative that you call Governor Dayton TODAY and tell him:

  • Greater Minnesota city leaders and residents are counting on him to call a special session to pass bonding and tax bills.

Also, contact your current state legislators TODAY and tell them:

  • Join with Greater Minnesota communities in support of a special session focused on passing the tax and bonding bills.

Contact info

Questions?

If you have any questions, please contact Bradley Peterson at bmpeterson@flaherty-hood.com or 651-259-1940.