Agenda - Council - 02/25/1986 - Laserfiche WebLink

Home

BUDG[I POLICY ~S-1. State Funding to Cities (A) Cities are heavily dependent on state funding. On average, homestead credit and local Bovernment aid together account for over two-thirds of the ~xpendltures of cities. It will be very difficult for cities to absorb cuts in the current budget.year. Economic challenges latinZ cities include a declinin~ tax base, cuts in federal support, costs growing faster than the ~eneral inflation rate, and the need to implement additional mandates. While a ~ood case can be made for exempting cities from state budget cuts, equality is a Co~.p~lling value. The League recommends that all components of the state budget be treated equally. That i.s: 1. All components of the state budget should be cut by an equal percentage without exception. 2. Cities should have equal access to restoration of funds if revenues come in greater than projected. 3. Each proBram should be cut individually and not shifted onto all cities throuBh the local ~overnment aid pro,ram as recommended by the Governor, 6. The state should not shift its cash flow problems onto local governments by changing the payment schedule. 5. While many systems are available for allocating the cuts by city, given that the cuts impact a budget year already begun, each city should be cut an equal percentage of the funds they were certified to receive in 1986. 6. The Legislature and the Governor should work with the League Board of Directors in developing and analyzing more detailed budget provisions. The League feels strongly that property tax relief should continue to be a high priority. Any budget cuts to cities will likely have some impact on future property tax levels. That fact should be acknowledged by state decision makers and the public. By fairly and equally reducing all components of the state budget, the impact on cities and property tax relief can be held to a more reasonable level. If all components of the budget are included equally in the cuts (including welfare and education), the percentage reduction each must endure will be reduced. Preliminary projections indicate that the overall percentage cut on a biennial (two year) basis would be approximately 2.7 percent. For cities that would mean a cut of 5.2 percent in local government aid in 1986 because our payments for the first year of the biennium have already been received. That is significantly less than the 8.1 percent reduction recommended by the Governor. Just as all components of the budget should share equally in reductions that are based on projected revenue shortfalls, all components should also have funds restored on an equal basis if actual revenue receipts are higher than those currently projected.