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Minnesota city leaders watching political tussle over local government aid

ST. PAUL - Money provided by Minnesota's Local Government Aid program is a mainstay in the budgets of cities throughout the state, and potential funding hikes and cuts to it have city leaders keeping a close eye on the Legislature.For 2017, Gov. ...

ST. PAUL – Money provided by Minnesota's Local Government Aid program is a mainstay in the budgets of cities throughout the state, and potential funding hikes and cuts to it have city leaders keeping a close eye on the Legislature.

For 2017, Gov. Mark Dayton has included a one-time $21.5 million increase to the program in his supplemental budget while Senate leaders confirmed Wednesday they have placed a $45.5 million boost in their version of the tax bill.
A potential increase in aid, which can be used by a city for any lawful purchase, would be good news to Crookston, which relies on the aid for 66 percent of its General Fund revenue.
"We're really hoping that the Senate's proposal can gain traction with everyone else," Crookston City Administrator Shannon Stassen. "The proposal would certainly be beneficial to a city like Crookston, no doubt about it."
This year, the city is set to receive nearly $3.6 million from the program. Should the Senate's $45.5 million proposal remain intact, Crookston stands to gain $270,000 in aid for 2017.
Dozens of cities across the state have ratified resolutions in support of an LGA increase, including area cities such as Crookston, East Grand Forks and Thief River Falls.
While Dayton and the Senate are pushing for a surge of funding, past versions of the House's tax bill includes LGA cuts to the tune of $84 million. The cuts primarily target Duluth, Minneapolis and St. Paul, which will receive $29.2 million, $77.8 million and $62.3 million, respectively, this year.
In total, about $519 million will be disbursed to Minnesota cities this year through the program--the highest amount since 2002.
Facing a major budget deficit, state legislators overhauled the system in 2003 and resulted in cuts to aid for cities. From 2002 to 2003, the total amount of aid paid to cities dropped from $565 million to $464 million.
Cities can use the money on just about anything, and Stassen said Crookston opted to use it to fund a large portion of its public safety services, such as its fire and police departments.
Crookston receives the largest amount of aid in Polk County, followed by East Grand Forks, which stands to get about $2.5 million in 2016. A $45.5 million funding increase to the program would have little affect on East Grand Forks, which would see a bump of just more than $2,000.
"Under the current formula and proposed formula, the amount we receive is virtually the same," East Grand Forks City Administrator David Murphy said, adding the city would welcome any increase.
The aid makes up about one-third of East Grand Forks' revenues.
LGA is disbursed based on a formula that takes into account population, average household size, peak population decline and the percentage of housing built before 1940.
Estimates put the number of Crookston homes and apartments built in 1939 and earlier at nearly half of the those still standing in the city, according to data from the U.S. Census Bureau.
Stassen said the city's older stock of homes with valuations lower than those in the metro area of the state makes raising property tax revenue difficult, and so LGA fills in what the city can't through taxes.
"If LGA were reduced drastically in any way or was just gone, Crookston would look very different," he said. "There would just be many things we would no longer provide because we know we couldn't levy the taxes locally that it would take to support that."

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