FFM Bulletin 12/9/08

City of St. Paul has "cut to the bone"?

Following the announcement of the State of Minnesota's historic budget deficit - $426 million for the current biennium ending June 30 and $4.85 billion for the 2010-2011 biennium - Governor Pawlenty offered some context for the upcoming debate. Minnesota's average biennial budget growth from 1960 to present is 19 percent, which Pawlenty rightly called "unsustainable and irresponsible." The governor also made a simple but important point regarding government spending, that spending growth is dependent on the "private economy's ability to sustain it." With the economy contracting and unemployment hitting a 15-year high, double-digit spending increases are no longer sustainable. And finally, Pawlenty promised that his proposed budget - to be released January 27 - will offer "dramatic change and dramatic reform" of state government, and that every option for righting the fiscal ship is on the table.

Unfortunately, not everyone is taking this approach. Immediately after the historic $5.3 billion budget deficit was announced, prominent local government leaders and advocates took to the cameras to announce what options were not on the table, namely Local Government Aid. LGA is the program that takes the tax dollars you pay to the state and redistributes them to cities, using a political and arcane system of distribution. The state is slated to redistribute over $1 billion of your tax dollars for LGA in the upcoming biennium.

One of the top recipients of that money is the City of St. Paul. In fact, over 35% of the city's General Fund revenues come from state aid.

That might explain why St. Paul Mayor Chris Coleman has been one of the loudest to protest, urging the governor and Legislature to avoid "[balancing] the budget on the backs of the cities across the state of Minnesota." And according to Coleman, any reduction would be devastating: "We have cut to the bone. There is no more room for us to cut."

If you're interested in seeing what Mayor Coleman considers "cutting to the bone", take a look at the budget he proposed for 2009. It includes:

  • an 8.2-percent property tax hike;
  • $117.0 million for city employee salaries, a 7.6-percent increase over 2008;
  • a 20-percent increase in the Public Works budget;an 8.2-percent increase in parks spending; and
  • the hiring of a new "bicycle coordinator" at a cost of $65,000

Mayor Coleman certainly has a curious definition of "cutting to the bone." Considering that unemployment is rising, market indices have plummeted, and disposable income is an increasingly rare commodity, the mayor's self-serving histrionic rhetoric isn't just ridiculous, it's insulting.

Duluth leaders furious with Governor Pawlenty for pointing out the obvious

Duluth city leaders are outraged with Governor Pawlenty for having the temerity to question their tax and budget policies. According to the Duluth News Tribune, Pawlenty "singled out Duluth" for planning a 14-percent levy increase "even though the economy is in recession and is not expected to grow by more than 1 percent before the end of 2009." Pawlenty made the remarks during a news conference last Thursday, and the angry responses came quickly.

City Council member Sharla Gardner said Pawlenty has been "starving us, not providing the local governments with the aid that we've been needing, which is why we have to do this."

Presumably Gardner is referring to LGA, the program that provides direct payments to cities from state coffers. In 2003, facing a then-unprecedented $4.5 billion deficit, the Governor and Legislature adopted some long overdue reforms to the bloated LGA program. That year, total LGA payments were reduced about 25% to about $470 million. And starting in 2004, the LGA formula no longer included built-in inflationary increases, thereby restoring some control to a program that encouraged irresponsible spending at the local level.

Duluth received LGA payments totaling $25.65 million in 2005. In 2009, according to the Minnesota House Research Department, they're scheduled to receive $30.73 million. Considering Duluth has a stagnant, or even declining population, that increase is significant. In fact, on a per capita basis, the city's LGA increased from $298 in 2005 to approximately $340 this year. If this is the Governor's way of "starving" Duluth, he's doing a remarkably ineffective job of it.

Duluth mayor Don Ness echoed councilmember Gardner's remarks: "I'm not sure if the governor is aware of the steps the city has taken to cut our costs and, unfortunately, cut our services to our citizens, and in doing so not passing burdens along to taxpayers."

It's worth noting that Duluth's tax levy is about to jump 14% in a single year, during a recession. By most people's standards, that's rather burdensome. But it's also important to recognize how Duluth got into this situation. The city's spending (excluding debt service, interest, and capital outlay) increased from $74.2 million in 2004 to $94.4 million in 2007, a 27-percent jump. During that same time period, city spending on "culture and recreation" increased by 70 percent.

Meanwhile, while they've taken some steps toward balancing their current budget, many of those steps are one-time gimmicks. In an act of desperation, the city even tried to fix their budget by auctioning off a Tiffany stained glass window and an historic lighthouse. And yet they shamelessly blame the state for their predicament. Note to Duluth policymakers: People who live in stained glass lighthouses shouldn't throw stones.


State Representative Paul Kohls (R-Victoria) has proposed a state spending freeze for the 2010-2011 biennial budget. The MN Spending Freeze Proposal is simple:

  • Limit General Fund spending to the lower of $34.6 billion (the amount spent in 2008-2009) or the projected revenues for the 2010-2011 biennium.
  • It is not an across-the-board freeze. Instead, it provides the legislature with the ability to set priorities and allows increased spending in certain areas of the budget as long as those spending increases are offset by spending decreases in other areas of the budget.

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