Agenda - Council - 08/23/1983 - Laserfiche WebLink

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league of minnesota oities I I I I I I I I I I August 12, 1983 TO: Mayors, Managers, and Clerks FROM: Donald A. Slater, Executive Director Peggy Flicker, Legislative Counsel RE: Update on LGA Proportional Reduction Issue The Revenue Department has determined that the cost of fully funding the LGA formula for the 1984 distribution is $3.45 million greater than the $246.2 million which the Legislature appropriated to fund LGA in 1984. In addition, the $6.4 million appropriated to cover the "3/4 mill grandfather provision" is $629,000 short, so a proportional reduction of that part of the aid is necessary, too. (Note - These "shortfalls" are not a sign of state budgetary problems. Because the updated data for computing 1984 LGA results in a higher cost to pay each city its final aid amount than is available in the appropriation, it is necessary to make some sort of proportional reduction.) In addition, the Department has decided to use the "Alternative One" method to make the proportional reduction. Thus most cities who had expected a 6% increase will still receive that increase, despite the shortfall. However, those cities which are "on the formula" or which receive aid on the basis of the 3/4 mill maximum decrease provision will be affected. As a percentage of expected LGA, the proportional reductions may be fairly severe in some of the affected cities. The LMC Board met on August 4 (before the Department's decision was made) to consider this situation and to decide what LMC action, if any, would be appropriate. The Department had asked the League to provide input concerning the decision. In addition, the League felt it was important for cities to discuss the issue, since it reflects a policy matter considered by the Legislature which is of great interest to many cities. The Board noted that since the time this problem first came to light and since the July 26 Action Alert* was sent, it has become more apparent that the Department was faced with an administrative decision concerning the correct interpretation of the LGA law passed by the 1983 Legislature, based On statutory language and legislative intent. It was not a policy decision as to which method might be "better" or "more fair." I I (OVER) I 83 university avenue ease, st. paul, minnesota 551 01 (61 2) 227-5800