From Mayor Steve Cook
Hutchinson

Because of the importance of Local Government Aid to Hutchinson and many other cities in Minnesota, a few comments that have been made recently in letters to the editor in the Leader should be addressed. First, the LGA program replaced several other aid programs and was designed to provide tax base equalization so all Minnesota cities could provide basic levels of services at a reasonable tax rate.

While the LGA program began in 1971 and is decades old, the formula that determines how much aid any one city gets has been changed and tweaked numerous times during the years. The current formula was actually adopted in 2003. The formula uses a number of factors to determine a city’s “need” and their “ability to pay” and compares them against some state averages to arrive at an amount of aid per capita for each city. While all cities are eligible for aid, the formula determines how much, if any, each city receives.

The LGA bill presented to the Legislature this year had some formula changes of its own, which is why it was so widely supported by city organizations. One was the removal of the controversial and arbitrary “regional center aid” component and its replacement with a more justifiable “jobs per capita” factor. The bill would also help more cities and provide more stable funding, both of which have been issues recently. Providing additional funding is also justified because the total funding is still $100 million less than in 2002 ($190 million when inflation is factored in).

Can Hutchinson “wean” itself from LGA? Since Hutchinson currently receives about $2.2 million each year and alternative revenue sources are so limited or restricted (like a local sales tax), that won’t happen any time soon — just like it wasn’t done in the past. Instead, I would argue that we should use our LGA dollars to lower our tax rate to a more reasonable level, just as the program intended. To do that we must manage our funds and budgeting effectively and a number of programs have been put in place, or have been started, to help us. The result is that our tax rate has been declining.

Can more be done? The City Council and staff are continually looking at ways to do just that, but that doesn’t make the LGA program any less important.