Minnesota Gov. Tim Walz proposes $30 million boost to local government aid

Gov. Tim Walz wants to raise state aid to local governments by about $30 million, a proposal drawing praise from city leaders across Minnesota who are relying more on property taxes as state funding has diminished.

"There is not a community out there that you don't hear about this," Walz said Wednesday. "And I think that I'll get Republican support on this because this is a principle that they believe in solidly too. That the closer you get to the decisionmaking of the people, sometimes you get better results."

Cities have been advocating for more aid for nearly two decades, particularly after former Gov. Tim Pawlenty cut the assistance as the state faced back-to-back budget shortfalls.

Walz said Wednesday at a Coalition of Greater Minnesota Cities event that the budget he will unveil in February would raise the annual local government aid package to the same level it was in 2002 — around $565 million.

Cities have been getting aid from the state since 1971 and use it to pay for services and repair and add infrastructure, like water treatment facilities and parks. Legislators created the program as a way to drive down property taxes, particularly in communities with fewer residents and less taxable land.

The state has restored some of the local government aid during former Gov. Mark Dayton's time in office. Nonetheless, the amount doled out this year is 5 percent below what was distributed 17 years ago, when local aid peaked.

Bemidji City Council Member Ron Johnson, who was in the audience as Walz discussed his plan, said he is hopeful this will be the year they have been waiting for. However, with the state's population and inflation growing, he said getting back to $565 million is just a starting point and in the future the aid should be adjusted as the cost of living increases.

"You got to take baby steps, I guess. Once you get back to the 2002 [level], maybe we can start working on having it grow again. We can at least get back to that base," Johnson said.

In 2002, local government aid made up 56 percent of Bemidji's general fund budget and that has dwindled to 27 percent in 2019, Bemidji Finance Director Ron Eischens said.

The city has had to raise taxes to make up for the lack of state dollars and has also increased fees on residents, Johnson said.

That's a common story. The amount of money Minnesota cities collect through tax levies has increased 123 percent since 2002, with stagnant state aid contributing to that growth, said Gary Carlson, intergovernmental relations director for the League of Minnesota Cities.

Rep. Paul Anderson, R-Starbuck, sponsored a measure last session to increase the aid to the 2002 level, but the proposal never became law. He said he believes Republicans and Democrats can get behind that idea, particularly if cities are strictly using the money to keep taxes down and pay for things like police, firefighters and critical infrastructure. There have been concerns in the past that cities are devoting the money to "fluffy" projects, like statues, he said.

In Ely, the state support helps keep the city functioning, Ely Council Member Heidi Omerza said. The city hosts more than 100,000 visitors a year, she said, but they don't have the economy and property tax base to operate at that level without assistance like local government aid.

For now, she said, she is not banking on additional funding.

"I hate to count our eggs before they're hatched, to be perfectly honest," Omerza said. "We're at the starting line of the legislative session, we're not at the finish line."