LGA, renter concerns shared

Cities could see cuts in local government aid and renters’ refunds if Gov. Tim Pawlenty’s budget proposal becomes law.

It would reduce LGA by 23 percent — $77.8 million in Fiscal Year 2010 and $168 million in Fiscal Year 2011. Even with the reduction, 763 cities will divide $823 million in LGA for the biennium.

“LGA is going to be a big issue,” said Rep. Paul Marquart (DFL-Dilworth), chairman of the House Property and Local Sales Tax Division, which heard the proposal Feb. 4. “I appreciate what the governor has put out here as his way to balance the budget, but is it fair? My concern is disparity.”

This proposal is coupled with market value credit reductions and is structured to fairly and evenly distribute the reductions across all cities, said Revenue Commissioner Ward Einess. The reduction would first come from certified 2009 LGA and then from the market value homestead credit if there is not enough aid.

Einess said a lot of time was spent looking at geographic disparity.

“The reality is what do you take when you’re taking everything they’ve got? We did our best to spread cuts around.”

“Haven’t our cities and local units of governments taken more than their share of the burden?” said Rep. Denise Dittrich (DFL-Champlin). “I think they have been treated unfairly.”

Cities have limits to how much they can levy, but cities can go to their voters to increase their levies whenever they want to.

“We made some very tough decisions,” Einess said. “It’s not true that all the cities are taking the brunt of this. This is not an indictment of local governments at all.”

Rep. Morrie Lanning (R-Moorhead) has never really liked levy limits.

“I have argued against them repeatedly,” he said. “They’re hard to argue when you have increases in aid. But when you have cuts in aid, it’s hard to justify the continuation of levy limits.”

Another issue that arose was the reduction of the renter’s credit.

Currently, renters receive 19 percent of rent paid in the form of a refund. Under the governor’s proposal this would be reduced to 15 percent.

Rep. Diane Loeffler (DFL-Mpls) did not like this proposal.

“There’s real inequity when you just pick a number,” she said. “One-size-fits-all doesn’t really fit anybody. I don’t think our tax system should create so many winners and losers.”