Scarcity thinking sometimes happens when we are frightened that there are just not enough of the valuables to go around. Like folks emptying the shelves of bread, bottled water and toilet paper before a hurricane, we are inclined to panic and get greedy. Someone ends up with more than they need, while a neighbor is left hungry and hurting.
Budget-cutting season is upon us in Minnesota. The state faces a $6.2 billion deficit. Tax revenue is down. It’s going to feel like there’s not enough funding to go around and legislators and the governor are going to need to be careful to make budget reductions that keep enough bread on the shelf for everyone and don’t leave friends, neighbors and entire communities hurting.
Proposed cuts to Local Government Aid (LGA) are on the minds of our area’s city council members. Republican legislative proposals for 2011 would permanently reduce LGA by about $100 million—a cut too deep! Ely’s share of the wound would be $178,263, leaving the city’s budget about 10 percent poorer.
Around the state, cities are facing the reductions at a time when many local budgets have already been set and implemented for the year. Municipalities may need to borrow money, further slash services or increase property taxes to keep the lights on.
Ironically, LGA was created in 1971 to prevent increases in property taxes and ensure that all communities had enough income to provide key services, no matter their size or property tax base. As part of the “Minnesota Miracle” that changed the state’s fiscal policies at that time, LGA allocated funds to various local governments except schools. LGA has changed over the years to target its largesse directly to cities and to distribute funds based on their specific financial needs. Those with lower property tax bases receive more LGA.
The amounts of aid allocated to individual cities has been alternately trimmed and increased over the years according to changing philosophies, economy, formulas, and regulations. A Session Daily report from the state House notes that the percentage of LGA as a part of city revenue has fallen to a historical low point in Minnesota.
The new bill proposes to make permanent the $304 million LGA reduction set for fiscal year 2011 as part of 2010’s budget-balancing legislation. However, the same legislation returned LGA back to $928 million for the 2012 fiscal year starting July 1. If, instead, LGA is frozen at the lower $690 million figure, cities will need to look for other revenue sources, such as raising property taxes, or cutting services even more drastically by mid-year.
Some opponents of LGA argue that property taxes are a better way to go than redistributing funds taken in by the state. They say, let local people pay for local services with increased property taxes and, if state laws are changed to allow them, by increased local sales taxes. In this example of scarcity thinking, it wouldn’t matter that poorer and less populated communities won’t have the tax bases to reasonably support community services. It’s an I’ve-got-mine mentality that doesn’t care whether there’s bread left on the shelf for the next guy.
They argue that LGA revenue is collected statewide and is only paid out to 89 percent of the state’s 763 cities. They propose that the 11 percent of cities who are wealthy enough from other tax sources to not qualify for LGA are getting ripped off. Those cities, including Burnsville, Bloomington, Brooklyn Park, Eagan and Plymouth, are not getting an LGA share, while Duluth, for example, gets 40 percent of its general fund financing from LGA.
I would argue that Minnesota is one big community where citizens deserve to have basic public services and needs met with help from statewide revenues. Police and fire responders, public works, planning and zoning, utilities, a library and economic development are not too much to ask. Good governance, programs for children and teens and recreation are essential to healthy communities. We should not let small and poorer towns fall by the wayside.
Wealthy communities with larger tax bases can afford to help support and protect the less affluent, helping to make the whole state financially and physically secure. Our towns are not isolated islands. Next time we’re visiting a city down the road in our state, we’ll hope it has enough police and fire fighters, clean drinking water, a functional waste water system and a park where the kids can play. It’s not just our town that needs those basic services. It’s towns where our friends live, where our grown children have settled and where we plan to visit next summer.
Minnesota will have to trim its budget, but needs to sustain its community values and share enough LGA to keep the lights on across the state. Scarcity thinking won’t get us there. Contributing our fair share will.
