Democratic Gov. Mark Dayton's budget proposal includes "very good news" for East Grand Forks and other Minnesota communities, city administrator Scott Huizenga said Tuesday.
But local lawmakers said the $37 billion proposal relies too heavily on tax increases and will need to be changed before the Republican-controlled Legislature can finalize the two-year budget this spring.
Dayton's budget would stabilize local government aid funding to communities across the state and increase education funding while also raising taxes on the wealthiest Minnesotans and making cuts to balance the $6.2 billion deficit.
Rep. Dan Fabian, R-Roseau, said LGA is important to many cities and counties. But he said the funding formula needs to be restructured to cut costs as the state tries to get a grip on the deficit.
"In order to be able to solve that, it's going to require some difficult decisions and LGA is one of them," he said. "This budget situation is so large that it's going to require some bold action."
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State Rep. Deb Kiel, R-Crookston, said the state needs to be "very careful" with how it spends money and warned that cuts will need to be made to almost every program to get a balanced budget without driving up taxes.
"Everybody really needs to take a bit of a hit, a reduction, in order for us to cover this large overspending that we have," she said.
'A compromise'
Huizenga said LGA is "vital" to East Grand Forks and comprises about 30 percent of the city's budget. But it's been "slowly dwindling away" in recent years, and the city has dealt with about $1 million in LGA cuts since December 2008.
While he said Dayton's proposal to preserve the funding is a good first step, Huizenga said he "stopped trying to speculate" how the LGA program will be funded in the final budget.
"This is certainly good news so far that we have a starting point that at least keeps LGA constant," he said. "No one was really anticipating any large increases. Just the fact that we can hold steady is good news."
Crookston city administrator Aaron Parrish said he was "encouraged" by Dayton's proposal and said it would help protect taxpayers who would have to pay more for essential city services if more cuts were made to LGA.
The city had about $579,000 in LGA cuts last year, and lawmakers could opt to make additional cuts this year as they deal with the deficit. But Parrish said any future reductions need to be part of a "whole budget solution."
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"Our ultimate goal is just to make sure that there's an honest budget compromise between the governor and Legislature that does recognize the importance of the local government aid program," he said.
Fabian said he thinks most Minnesotans will oppose Dayton's budget proposal because it calls for an "irresponsible" 22 percent spending increase when the state should be tightening its belt.
"California's cutting spending, he said. "We need to follow some of the other models of how other states are solving their significant budget issues, which the governor has termed a crisis here in Minnesota."
And he's concerned about the tax increases in the proposal, which would bump the rate up to nearly 14 percent for those earning more than $500,000 -- one of the highest rates in the country.
"I just don't believe that raising taxes in a bad economy is a wise decision to make for the state of Minnesota," he said.
Kiel said the new spending in Dayton's budget doesn't make sense at a time when the state is working to overcome a big deficit. She said the tax increases could force businesses to move to neighboring states, including North Dakota, that have lower rates.
"It doesn't allow them to hire more people and that's what we want them to be doing, not spending taxes," she said. "In the end, that will help us much more by providing jobs than raising their taxes."
Kiel said she expects a "tough battle" in the Legislature as lawmakers work toward a final budget, which will need to be in place this spring to go into effect July 1.
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State Sen. LeRoy Stumpf, DFL-Plummer, said keeping LGA at its current funding "means a lot to our communities," especially after years of cutbacks. But lawmakers are just now beginning the "delicate" task of finalizing the budget, and he said the fate of LGA might not be known until later this spring.
"We'll see how things start coming together now that we're kind of taking that first step and see what the Legislature will do with it," he said. "In the end, it has to be a compromise."
Johnson reports on local politics. Reach him at (701) 780-1105; (800) 477-6572, ext. 105; or send e-mail to rjohnson@gfherald.com .
