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Major State Aids & Taxes: Local Government Aid (LGA)

Program Description

Local government aid (LGA) is a state program that provides property tax relief by giving general purpose financial support to cities. "Ability to pay" and "need" are the measures used in the formula. Ability to pay is the city's adjusted net tax capacity for all cities, regardless of population.

  • For cities with population of 2,500 or more, need is determined by five characteristics: population decline, age of the housing stock, if the city is in the seven-county metro area, average number of vehicular accidents over the most recent three-year period, and household size.
  • For cities with population less than 2,500, need is determined by population decline, age of housing stock, percent of the property in the city classified as commercial or industrial, and a population adjustment factor. 

The state gives additional aid to cities with a population less than 5,000 based on population, and to cities with a population of 5,000 or more based on the ratio of jobs to population in the city.


Aid Amount and Reporting

2013 Local Government Aid: $427.5 million

The 2013 certified LGA total was $427.5 million.

LGA data was obtained from the Department of Revenue.

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Recent Law Changes

Below is an overview of the changes made to city LGA.

City LGA

2009 aid changes:

In response to criticism that the LGA formula was (1) too volatile, (2) didn't recognize needs of certain cities, and (3) was underfunded, the 2008 Legislature modified the program as follows, with the changes taking effect in 2009:

  • Beginning with 2009 aids, maximum annual reductions to individual cities were lowered to limit volatility.
  • Beginning with 2009 aids, the extra aid to cities with a population less than 5,000 was increased from $6 per capita to $8.50 per capita but moved from the city aid base and included in the LGA formula. A new aid for cities with 5,000 or more in population was added to the formula, based on a city's jobs per capita. A city's small city aid or city jobs aid is reduced if its "need" is less than its "ability to pay" measure.
  • Beginning with 2009 aids, taconite aids was removed from the "ability to pay" measure for all cities.
  • Beginning with 2010 aids, volatility is further reduced by (1) using data available as of January 1 of the year in which the aids is certified to calculate the need, and (2) using the average of two years of "unmet need" (need minus the ability to raise revenue) to calculate aid each year.
  • The LGA appropriation was increased to $526 million for 2009, by an additional 2 percent in 2010, and another 4 percent in 2011. These increases were subsequently eliminated due to unallotment and legislative action in 2009 to 2011.

2009 to 2012 aid reductions:

  • The actual LGA payment in 2009 for cities with a population of 1,000 or more was reduced by $44.6 million from $526.1 million to $481.5 million through unallotment by the governor that was later ratified retroactively in the 2010 special session.
  • LGA reductions in 2010 consisted of two parts--$102 million in the governor's unallotments, ratified retroactively in the 2010 special session, and $7.8 million in additional reductions enacted in the regular 2010 session. The reduction in the governor's unallotment only applied to cities with a population greater than 1,000.
  • The certified 2011 LGA amounts fo $527.1 million were reduced by $101.9 million to actual payments of $425.2 million.
  • 2012 LGA payments to each city were reduced to the lesser of:
    • aid paid in 2010, or
    • aid certified in 2011.

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Per Capita Maps

Map of local government aid per capita by countyMap of local government aid per capita by economic development region

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The Past Five Years of Local Government Aid

The table below shows the distribution of local government aid in thousands of dollars for the past five years for the state and economic development regions. The graph shows total dollars of local government aid for that same time period in nominal (actual) and constant (inflation-adjusted) dollars.

Local Government Aid: Calendar Years 2009 to 2013
Nominal dollars, in thousands
2009 2010 2011 2012 2013 5-Yr. Chg. Aid
State $481,522 $426,438 $425,345 $425,238 $427,495 -11%

Northern Regions
Northwest (1)
Headwaters (2)
Arrowhead (3)
West Central (4)
Five (5)
East Central (7E)
15,976
5,420
68,825
27,565
13,731
7,791
15,276
5,155
64,775
25,641
12,998
6,774
15,189
5,145
64,650
25,531
12,927
6,762
15,189
5,145
64,650
25,531
12,927
6,762
15,190
5,161
64,781
25,606
13,016
7,189
-5
-5
-6
-7
-5
-8

Southern Regions
Six East (6E)
Upper MN Valley (6W)
Central MN (7W)
Southwest (8)
Nine (9)
Southeastern MN (10)
16,367
9,431
24,726
22,534
41,981
64,114
15,280
8,917
20,819
21,503
39,477
56,593
15,207
8,863
20,791
21,341
39,375
56,586
15,207
8,863
20,791
21,341
39,375
56,479
15,244
8,949
21,368
21,341
39,426
56,640
-7
-5
-14
-5
-6
-12
Total Nonmetro $318,460 $293,207 $292,368 $292,261 $293,912 -8%

Metro Region
Hennepin County
Ramsey County
Remaining Metro
88,082
63,183
11,797
69,635
54,996
8,600
69,635
54,971
8,371
69,635
54,971
8,371
69,635
54,971
8,977
-21
-13
-24
Total Metro $163,062 $133,231 $132,977 $132,977 $133,583 -18%

Statewide Local Government Aid

Line graph of statewide local government aid

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March 2017

House Research Department  ♦  600 State Office Building, Saint Paul, MN  55155  ♦  House.Research@house.mn  ♦  651-296-6753