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How wou]~..the proposed League policy. on state funding differ from the <br />~overnor~s recommendations? <br /> <br /> The League policy asks that all components of the state budget receive <br />cuts equally. The governor made several exceptions: education would receive <br />only a 2.5 percent cut on a biennial basis, and some welfare programs were <br />exempt from cuts. The League feels that all programs should share cuts <br />equally. The result of this is a lesser reduction for all. <br /> <br /> ~ile the governor's budget would cut approximately $32.5 million from <br />cities in LGA and homestead credit, the League proposal of applying an equal <br />cut to all state budget items would reduce the cut for cities to a total of <br />approximately $22.2 million. While that is still a major cut, it is a much <br />more equitable and manageable one. For local government aid, the League <br />proposal would result in a cut of about 5.2 percent as opposed to 8.1 percent. <br /> <br />What if the prq~ect.ions are wrong and ~tate revenues come in hi~her than <br />projected? <br /> <br /> The governor has recommended that the state would restore funds to <br />education (public schools and post-secondary institutions) first if the state <br />projections are overly pessimistic. Only after restoring all education funds <br />would any other cut program be eligible for funds restoration. The League <br />recommends that cities have equal access to restoration funds. If we must <br />share in the shortfall, we should also share in any unexpected windfalls. <br /> <br />What about the state payment schedule? Can we count on bein~ paid on time? <br /> <br /> Once again the state is looking to local governments to solve its cash <br />flow problems. Currently cities receive six equal payments of LGA and <br />homestead credit during the months of 3uly to December. The governor has <br />recommended that cities receive two equal payments; one in July and one in <br />December. In theory, interest earnings on the larger first payment would <br />balance out any borrowing costs cities would incur waiting for the second <br />payment. <br /> <br /> The state should not solve its cash flow problems by causing local units <br />of government to do short-term borrowing. The current payment schedule should <br />remain. If the state makes changes, it should work toward getting funds to <br />cities earlier in the year, not later. <br /> <br />What are the implications of this for 1987 and future years? <br /> <br /> Unfortunately, 1987 will also be a very difficult budget year for the <br />state. Last year the state passed a $900 million tax cut which the state only <br />began to implement in the first year of the biennium. Some phased-in <br />provisions will have a larger impact in the next biennium. The governor has <br />recommended that local government aid increase only three percent for 1987. <br />That would hardly begin to restore the funds cities would lose in 1986. The <br />proposal further recommends that the state freeze the homestead credit <br />appropriation at its reduced 1986 level. <br /> <br /> Cities will find it very difficult to balance their 1987 budgets without <br />tax increases. Even without any increase in levy, many communities will see <br /> <br />-3- <br /> <br /> <br />