CGMC opposes ‘Phase 1’ budget bill

Last week, the Republican legislative majorities in both the House and Senate released what is being referred to as a “Phase 1” budget proposal, which would cut state spending by $1 billion, of which $144 million would come from cities in 2011. The tax portion of this bill—H.F. 129, authored by Rep. Davids (R-Preston), Chair of the House Tax Committee—received its first hearing in the House Tax Committee on Wednesday. On behalf of CGMC, Steve Peterson, senior policy analyst with CGMC’s lobbying firm Flaherty & Hood, testified against the bill.

CGMC opposes the budget proposal for three reasons:

1. In July 2010, cities were certified to receive a specific amount of LGA and set their 2011 budget and levies based on this certified amount. As shown in the chart below, any cuts made to LGA for 2011 will come in the middle of the cities’ budget year and force significant cuts to services, short term borrowing or draining of reserve funds because cities cannot increase their levies until January 2012.

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2. The current proposal solves only $1 billion of the $6.2 billion deficit and is not a comprehensive solution. In order to insure that LGA is not repeatedly cut in subsequent bills, the legislature should not cut LGA before there is a complete budget solution supported by the governor and legislature. Greater Minnesota legislators should have the full budget picture so that they know how their choices will affect their constituents before they vote on a budget bill.

3. Cuts to LGA put greater Minnesota cities, homeowners and businesses at a competitive disadvantage with the metro area. The LGA program is intended to alleviate property tax and service disparities between high and low wealth communities. Without adequate funding and support from legislators, the program will be ineffective and greater Minnesota communities will become unaffordable, unattractive places to live or do business.

In response to this proposal, CGMC released a statement from our president Nancy Carroll, which can be found here. For more information on CGMC’s position, please contact Steve Peterson at smpeterson@flaherty-hood.com.

Where does the money go: Part two

An explanation of greater Minnesota city spending

In 2008 (the year with the most current auditor data), cities outside the seven county metro area and over 2,500 in population spent nearly $1.6 billion. City expenditures are broken up into three general categories: current, capital and debt payments and fiscal charges. Current expenditures are comprised of expenses related to current operations, such as salaries for police officers. Capital outlays include the purchase, construction or permanent improvements of buildings, equipment, machinery and land. Debt payments and fiscal charges include cost of servicing outstanding debts.

As shown in the chart below below, current expenditures are the majority of city spending.

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The chart below combines capital and current expenditures into similar categories. In 2008, streets, public safety, debt and parks and recreation made up 71 percent of all city spending. Of all the remaining spending areas, only economic development consisted of greater than 5 percent of city spending. Similar to the state’s financial situation, revenue decreases force cities to either eliminate smaller services all together or enact large cuts to major service programs.

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Lowering nitrogen standards could increase costs for cities

The MPCA recently informed Minnesota’s regulated community that it is planning to tighten its regulations relating to nitrogen, lowering the state’s aquatic life standard for nitrate from 10 mg/L to 5 mg/L. The standard under discussion could force many small communities to abandon lagoon systems and other simplified technologies to construct sophisticated biological nutrient removal at great cost to the communities. The federal EPA is also pushing states whose waters flow into the Mississippi to adopt nitrogen standards to protect the Gulf of Mexico, even though it has not come up with an overall plan (called a TMDL) that details municipalities’ role in controlling this type of pollution. The EPA is attempting to force reductions in all tributary states, even where municipalities contribute little to the problem. States such as Minnesota should not be forced to adopt strict standards on nitrogen until the EPA has completed its TMDL and should be allowed to adopt more cost effective methods for addressing the problem.

CGMC continues to monitor this issue at a state and federal level and is urging legislators to consider requiring the MPCA to wait until the EPA completes its Gulf TMDL before lowering nitrogen standards. For more information, contact Elizabeth Wefel at eawefel@flaherty-hood.com.

Reminder: RSVP to CGMC Legislative Action Day

Join city officials from across the state for CGMC’s annual Legislative Action Day, which will be held Wednesday, February 9. Each year, mayors, city council members and city staff from greater Minnesota meet in St. Paul to discuss important policy issues for the session and visit with their local legislators at the Capitol. At night, you are invited to join our members in a more casual setting at Mancini’s Char House for dinner and mingling. A social hour will start at 5:30 p.m. with dinner being served at 6:30 p.m. The cost of dinner is $24 and can be paid at the event. If you are able to attend, please RSVP to Colleen Millard at cfmillard@flaherty-hood.com or 651-259-1914.