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Cities, lobbyists push for larger state aid payout for 2017

With Minnesota forecasted to post a nearly $2 billion surplus, cities such as East Grand Forks are hoping that translates into more state dollars in their pockets.

If the lobbying efforts of the Coalition of Greater Minnesota Cities and others are successful, cities of all sizes across the state could see an increase to local government aid.

The coalition will be pushing for an aid increase of $45.5 million in 2017 and is seeking resolutions of support from its 85 member cities to present to the state Legislature during the 2016 session, which is set to begin March 8.

Local government aid is state money provided to city governments that can be used for any lawful expenditure. In 2016, the state is expected to distribute more than $519 million in aid to Minnesota cities.

"It's a much bigger deal here in East Grand Forks where we rely on it more," City Administrator David Murphy said.

For East Grand Forks, the aid disbursement usually represents 25 percent of the city's overall income.

The coalition's push seems to have backing from the East Grand Forks City Council, which discussed submitting a resolution of support at its work session earlier this week.

"When the state of Minnesota had a large deficit, they turned to the cities and school districts to help them close that gap," council member Mike Pokrzywinski said during the meeting. "Now that they have a surplus, it's only fair to give back what they took away."

The council will vote on the resolution of support at its meeting Tuesday.


Since 2002, the annual amount of aid received by East Grand Forks has fluctuated between about $2 million and $2.7 million, according to data from the Minnesota House of Representatives Research Department.

Last year, the city received $2.5 million in aid or about $293 per resident. The aid is split into two disbursements that are generally received in the spring and fall, Murphy said.

Fifteen cities received a total of $7.5 million in local government aid last year in Polk County.

Crookston topped the list with $3.5 million in aid followed by East Grand Forks. The next highest recipient was Fosston with $572,000.

Comprehensive annual financial reports for the East Grand Forks indicated that local government aid has historically comprised about 33 percent of its general fund revenues, according to the reports. The city's general fund revenues are used to pay for a majority of city services and come mainly from property taxes and government aid.

The general fund doesn't include money from the city's enterprise funds — revenues it raises through selling products such as water and sewer access.

Program history

The Local Government Aid Program has been in place since 1972, though its funding distribution formula has changed a number of times in the past four decades.

To determine how much aid a city receives, the current formula considers a number of factors, including its population, average household size, peak population decline and the percentage of housing built before 1940.

"It's supposed to be based on need and go toward cities that are more property poor," Murphy said.

In some small rural cities, Murphy said local government aid can represent close to two-thirds of revenue while some Twin Cities suburbs receive none.

The program has its critics, including the Freedom Foundation of Minnesota, which published a report in 2009 that described it as "local government welfare."

Facing a major budget deficit, state legislators overhauled the system in 2003 and resulted in cuts to aid for cities. From 2002 to 2003, the total amount of aid paid to cities dropped from $565 million to $464 million.

Another downturn in the economy reduced state revenues and with that came a decrease in aid disbursements for fiscal years 2008, 2009 and 2010. During that time, East Grand Forks' allocation froze at $2.47 million for four years, according to the House Research Department data.

The city adjusted to the aid cuts through a "combination of increased user fees, reduced staffing through attrition and freezes in non-fixed operating expenses," a 2014 financial report notes.

Through those means, the city was able to bring down operating costs.

The House Research Department estimates East Grand Forks' expected local government aid amount for 2016 to be about $2.48 million.