By Tom Larson
The City of Morris will lose almost $128,000 in Local Government Aid this month based on Gov. Tim Pawlenty proposal to take back a substantial sum of aid to cities to help offset the state's current budget shortfall.
The lose wasn't as much as city officials believed it might be. Pawlenty was pondering a $100 million "unallocation" of Local Government Aid and Market Value Homestead Credit reimbursements, which would have cost Morris about $200,000 from a payment it's expecting on Dec. 26.
Nonetheless, the cut is significant and might force the city to freeze anything other than essential services.
"You never want to lose any aid," said City Manager Blaine Hill, "but it's better than getting whacked a lot."
The city was expecting LGA and MVHC payments totalling more than $1 million next week, one of two aid payments cities typically receive in a year.
But the state is facing a current budget deficit of about $426 million, and a shortfall of about $4.8 million for the 2010-2011 biennium. Some sources indicate that that two-year shortfall could reach $6 billion when updated forecasts are released in February.
Pawlenty used a budgetary tool known as "unallocation" to reel back some of those funds to help erase short-term budget deficits once reserves have been expended.
Before Pawlenty's announcement, Morris was to receive LGA of more than $978,000 and MVHC of more than $52,000. Now, that LGA payment will be about $850,000. The city's MVHC will remain the same. The LGA cut is just more than 4 percent of the city's revenue base of $3.1 million.
Hill said the city will likely offset the unallocation by drawing down reserves, then reevaluating the budget for 2009. Things such as purchases, travel and other discretionary spending could be frozen.
The city also is expected to review major projects, like a $2.6 million infrastructure improvement of the Highland Homes Addition scheduled to begin this spring.
Hill and other Minnesota city officials were briefed Thursday afternoon about potential budget implications during a League of Minnesota Cities telephone and computer conference.
According to LMC Executive Director Jim Miller, there is "no possibility" that city budgets will emerge unscathed in what is termed the unallocation of designated funds for the current budget, nor are cities likely to escape some aid cuts when the Legislature addresses an expected $4.8 billion deficit for the 2010-2011 biennium in January.
Other budget items will be on the table when lawmakers begin their discussions, but for now, Local Government Aid and the Market Value Homestead Credit reimbursement paid to cities were the focus of the LMC briefing.
Currently, Morris receives annually about $2.2 million in LGA and MVHC, which is an amount of money that taxpayers receive as a credit and the city receives from the state as a reimbursement.
Cities with fewer than 1,000 population and counties with fewer than 5,000 population will not be affected by Pawlenty's unallocation.
That might not be the case when the state tackles its $4.8 billion shortfall.
"This is kind of the tip," Hill said.
See the Sun Tribune on Wednesday and this Web site for updates on this story.