By Tom Larson
The City of Morris could lose almost $200,000 in state aid it was expecting this month if Gov. Tim Pawlenty opts to take back a substantial sum to help offset the state's current budget shortfall.
The lost money -- about 20 percent of what the city is expecting -- could mean that the city will have to postpone projects such as the planned Highland Homes improvements in 2009, and could force the city to freeze spending on all but essential services, City Manager Blaine Hill said.
"It would be a huge hit," Hill said.
Hill and other Minnesota city officials were briefed Thursday afternoon about potential budget implications during a League of Minnesota Cities telephone and computer conference.
Pawlenty on Friday is expected to release his plan for tackling a $426 million shortfall in the current state budget.
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.
The city is expecting to receive about $978,000 in LGA and $52,000 in MVHC this month.
But Pawlenty can use 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.
Right now, the state's reserves of about $155 million knocks the $426 million deficit down to $271 million, and state agency reductions could net an additional $40 million, according to Gary Carlson, the league's Intergovernmental Relations Director.
That leaves a $231 million shortfall, and the LMC believes the governor will unallocate between $25 million and $100 million from LGA and MVHC funds. The amount a city might lose is expected to be based on a percentage of each city's revenue base.
According to LMC estimates, Morris would lose about $37,000 if the governor chooses to unallocate $25 million in state aids. The figure is $196,900 if Pawlenty unallocates $100 million statewide.
Currently, about half of Morris' $1.1 million tax levy goes to debt service on bonds sold to finance such things as infrastructure improvements. Since the city obviously can't reduce that obligation, the city likely can't take on the estimated $2.6 million in bond debt to pay for the Highland Homes work this summer, Hill said.
"When those taxes come on (the budget) in 2010, that could be a budget buster," he said. "We could be back to patching streets."
See the Saturday, Dec. 20 Sun Tribune and this Web site for more on this story.