Guest Commentary: Investing in LGA: A modest increase will go long way
Published 5:27 pm Tuesday, February 1, 2022
By Pat Baustian
President of the Coalition of Greater Minnesota Cities
Minnesota has been hit with so many “unprecedented challenges” over the past 24 months that it may be time to banish the phrase, along with other COVID-era cliches like “the new normal” and “you’re on mute.” But this legislative session, Minnesota lawmakers will face yet another unprecedented challenge: what to do with a massive $7.7 billion budget surplus.
As cities dig out from the economic uncertainty caused by the pandemic, it is reassuring to know Minnesota is on solid financial footing. The surplus — the largest in state history — provides a unique opportunity to invest in the long-term health of our state and local communities. One modest investment that will have a major positive impact is to increase funding for Local Government Aid (LGA).
This session, a top priority for the Coalition of Greater Minnesota Cities (CGMC) is a $90 million increase in the statewide LGA appropriation. By spending slightly more than 1% of the surplus to boost LGA, lawmakers can help strengthen a program that is vital to reducing inequities between cities, restraining property taxes and ensuring all Minnesotans can share a good quality of life regardless of zip code.
Here are five reasons spending a small fraction of the surplus on an LGA increase is a wise investment:
No. 1: LGA levels the playing field for all cities.
One of the main purposes of LGA is to ensure all cities can provide the same level of services regardless of their ability to generate revenue through property taxes. For example, a 1% increase in the city property tax levy would raise $7,900 in Mountain Lake, whereas it would generate $403,000 in Minnetonka. LGA helps even out these disparities.
No. 2: LGA restrains property taxes.
Historically, every dollar of LGA results in 50 cents worth of property tax relief. When CGMC surveyed city leaders last fall on how they would plan to spend additional LGA, 74% of respondents said they would use it to hold down or reduce their city’s property tax levy.
No. 3: LGA provides consistent funding.
Funding from the federal government has been critical in helping cities cover the added expenses brought on by the pandemic. However, that is one-time money that can only be spent on a narrow list of items. LGA is a consistent funding source, and cities have the flexibility to spend it based on their own unique needs and circumstances.
No. 4: LGA has not kept up with inflation.
From 2009 to 2020, inflation rose 27%, while the state’s LGA appropriation only grew 16%. More inflation woes are predicted, and cities are already feeling the pinch. Over the last decade, costs for everything from employee benefits to concrete to machinery have been steadily rising. In just one example, the cost of rock salt used on roads — an unavoidable expense in a Minnesota winter — has risen 42% in the past 10 years, according to the U.S. Bureau of Labor Statistics.
No. 5: Support for LGA is support for Greater Minnesota.
While nearly 90% of cities in Minnesota receive LGA, it is especially important in Greater Minnesota where there is less property tax wealth and fewer options for cities to combine resources. In fact, 66% of the money the state spends on LGA goes to Greater Minnesota.
As state legislators head back to work, they will undoubtedly hear from individuals, groups and special interests all seeking a piece of the budget surplus. Luckily, with $7.7 billion available, opportunities to make smart investments abound. By using a small portion of the surplus to increase LGA, lawmakers can show their commitment to improving the health and vitality of cities across the state.
Pat Baustian is the mayor of Luverne and president of the Coalition of Greater Minnesota Cities.