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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.

The legislature enacted a new LGA formula during the 2013 session, effective beginning with aids payable in 2014. The new formula contains three measures of need depending on a city's size:

  • for small cities, with a population less than 2,500, need is based solely on the city size up to a maximum per capita amount;
  • for medium cities, with a population of at least 2,500, but less than 10,000, need is based on (1) percent of housing built before 1940, (2) household size, and (3) population decline from a city's peak population in the last 40 years; and
  • for large cities, with a population of 10,000 or more, need is based (1) jobs per capita, (2) age of housing stock (both housing built before 1940 and housing built between 1940 and 1970), and (3) a sparsity adjustment for cities with a population less than 150 per square mile.

If the aid a city received in the previous year exceeds its "unmet need" (the difference between its needs and its ability to pay), its aid is reduced to its unmet need. (The reduction may occur over a few years since the maximum decrease in any year is limited to the lesser of $10 per capita or 5 percent of its property tax levy in the previous year.) All other cities receive an amount equal to their previous year's aid plus an additional amount based on their unmet need.


Aid Amount and Reporting

2014 Local Government Aid: $507.6 million

The 2014 certified LGA total was $507.6 million.

LGA data was obtained from the Department of Revenue.

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Recent Law Changes

LGA formula prior to 2014

The main formula used prior to 2014 also depended on "ability to pay" and "need" measures similar to the new formula, however there were only two measures of need:

  • For cities with population of 2,500 or more, need was determined by five characteristics: population decline, age of housiing stock, if the city was 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 was 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 program also distributed 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.

The formula did not guarantee any city received its aid from the previous year, outside of certain minimums, but redistributed the entire appropriation every year. The resulting volatility of payments to individual cities was partially addressed in several formula changes made in 2009. The new formula enacted in 2013 significantly reduced payment volatility.

2010 to 2012 aid reductions:

  • 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 LGA aid in thousands of dollars for the past five years for the state and economic development regions. The graph shows total dollars of LGA for that same time period in nominal and constant (inflation-adjusted) dollars.

Local Government Aid: Calendar Years 2010 to 2014
Nominal dollars, in thousands
2010 2011 2012 2013 2014 5-Yr. Chg. Aid
State $426,438 $425,345 $425,238 $427,495 $507,598 19%

Northern Regions
Northwest (1)
Headwaters (2)
Arrowhead (3)
West Central (4)
Five (5)
East Central (7E)
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
16,967
5,979
70,647
27,998
15,065
10,001
11
16
9
9
16
48

Southern Regions
Six East (6E)
Upper MN Valley (6W)
Central MN (7W)
Southwest (8)
Nine (9)
Southeastern MN (10)
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
17,456
9,890
27,381
24,186
43,221
66,481
14
11
32
12
9
17
Total Nonmetro $293,207 $292,368 $292,261 $293,912 $335,272 14%

Metro Region
Hennepin County
Ramsey County
Remaining Metro
69,635
54,996
8,600
69,635
54,971
8,371
69,635
54,971
8,371
69,635
54,971
8,977
87,917
67,074
17,335
26
22
102
Total Metro $133,231 $132,977 $132,977 $133,583 $172,326 29%

Statewide Local Government Aid

Line graph of statewide local government aid

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December 2017

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