BLEEDING COMMUNITIES DRY

HOW LGA CUTS ARE HURTINGRURAL MINNESOTA

Jef Van WychenMinnesota 2020 FellowMarch 2009

Table of Contents___

Executive Summary & Key Findings 1Background: History of State Aid to Cities 4Declining State Assistance Since 2002 6Surveying Greater Minnesota Mayors 9Open-Ended Responses from Mayors 14Conclusion: Front Row Seat to a Fiscal Train Wreck 16

Bleeding Communities Dry 1

Executive Summary & Key Findings____

No group of Minnesotans are more qualied to comment on the challenges of delivering public servicesduring a period of diminishing resources than our state’s city mayors. Minnesota 2020, in partnership with theCoalion of Greater Minnesota Cies, and Macalester College, surveyed 43 greater Minnesota mayors aboutthe crical issues facing Minnesota cies.As a result of large reducons in state aid, Minnesota cies have been compelled to increase property taxesat the same me that they must cut essenal services. From 2002 to 2008, real (i.e., inaon adjusted) percapita state aid to Minnesota cies declined by 47 percent. Because of their relavely low per capita tax base,greater Minnesota cies are more dependent on state aid than cies in general.The Minnesota 2020 mayors’ survey highlights the harm done to greater Minnesota cies from past aid cutsand the damage of future aid cuts from the perspecve of the greater Minnesota mayors. The responses,which clearly show the strain many of the cies are under to provide crical services with less and less, donot include the impact of the $66 million cut to city local government aid (LGA) and market value homesteadcredits in December 2008 resulng from the Governor’s unallotments. Those cuts occurred aer the surveywas conducted.

Ongoing State Cuts are “Devastang” to Minnesota Cies

•Given that the state of Minnesota greatly restricts the abilies of cies to generate revenue from localtax bases, it is not surprising to learn that 81.4 percent of the mayors surveyed agreed that the state hasan obligaon to assist in funding city services.