Herald Journal - Enterprise Dispatch - Delano Herald Journal
Area cities feel state deficit pinch

December 29, 2008

By Starrla Cray
Staff Writer

“Belt tightening” is a common phrase on the lips of area city officials after Gov. Pawlenty’s Dec. 19 announcement that many Minnesota cities will receive less government aid than originally expected. To see a breakdown of numbers from area cities, click here.

To help with the state’s short-term deficit of $426 million, the Dec. 26 payment of 2008 local government aid (LGA) and market value homestead credit (MVHC) was reduced by a total of $66,009,930.

For the city of Winsted, this translates to $67,500 less in funding.

“These are tough times,” Winsted mayor Steve Stotko said. “Just like things at your house, it’s the same thing for us. We have to tighten the belt a little tighter.”

Lester Prairie city clerk Marilyn Pawelk said her city is going to be very cautious about future purchases. “We’ll have to see what we can cut back on or not do.”

Cities with populations under 1,000 are exempt from the cuts, which means that New Germany, with a population of 366, did not have it’s LGA reduced.

Waverly’s population, however, is 1,028. Because they have more than 1,000 people, their unallotment was $35,197.

“What a shame,” Montrose Mayor Charlie Nelson said. “That’s really costing them. Theirs is a unique situation.”

“We kind of questioned that population estimate,” Deb Ryks, Waverly city clerk said.

“We did everything we could to save our LGA,” Waverly acting mayor Ken Antil said. “It’s not to our liking, but I don’t think we can do anything about it. This is going to be a lean year.”

According to the League of Minnesota Cities, “the cut represents roughly 4 percent of city ‘revenue base,’ which is 2008 certified levy plus certified 2008 LGA plus taconite aids.”

Cuts are first taken from LGA, and if more is needed, it is taken from the MVHC reimbursement.

The rest of the short-term deficit will be covered with the state’s $155 reserve fund, a $40 million reduction in state agency appropriations, and unallotments from counties ($44 million), health and human service programs ($73 million), the University of Minnesota ($20 million), Minnesota State Colleges and Universities ($20 million), state agencies ($40 million), Minnesota Housing Finance Agency ($4 million), and the 21st century mineral fund ($1.5 million).

Although this year will be a struggle for many cities, future cuts are of primary concern. Minnesota has a projected long-term deficit of $4.8 billion for 2010 and 2011.

“That’s what we’re really worried about,” Richard Lammers, Howard Lake mayor, said.

“2009 is going to be a whole ‘nother animal,” Stotko added. The League of Minnesota Cities fact sheet stated that because the state has few available resources in reserve, state aid reductions for 2009 will likely be even higher.

Nelson, however, remains optimistic. “I trust the state to take care of their problems,” he said. “I think things are going to start looking up.”

Many cities are familiar with LGA cuts. In 2004, the city of Mayer only received $499 in LGA, Luayn Murphy, Mayer city administrator, said. This year’s reimbursement of $51,440 was much higher, but it was still less than the promised amount of $106,673.

“The whole state revenue system is going to have to be modified for this not to happen again,” Kelly Hinnenkmp, Howard Lake city administrator, said.

“We’re running into hard times right now,” Lammers said.

“I don’t think the state really has options,” Hinnenkamp said. “I’m hoping they’ll be creative enough to help us make things work.”

“The state should quit telling people they can do more with less, because they cannot,” Nelson added. “There’s a limit on how much you can tax people, especially in these tough economic times.”


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