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FF-4. Funding Local Government <br />Aid <br />Issue: Local government aid (LGA) is an <br />important component in the state's property <br />tax relief system, and a critical tool to help <br />equalize tax base to ensure needs for public <br />services can be met. To avoid undue <br />pressure on the property tax, funding for <br />LGA must keep pace with inflationary <br />pressures. For 2021, the total unmet formula <br />need (the difference between need and <br />ability to raise revenue) is $776.4 million, <br />leaving the current appropriation $212.0 <br />million below the total unmet need. <br />During the 2017-18 biennium, several bills <br />were introduced that would have, for <br />example, created offsets to a city's LGA <br />distribution if the city imposed a local sales <br />tax, spent funds for activities related to <br />lobbying or a World's Fair, or would have <br />reduced or eliminated LGA if the city <br />enacted ordinances to ban plastic bags, <br />impose certain local labor laws, ordinances, <br />or policies that restrict city employees from <br />enforcing immigration laws, unauthorized <br />ordinances related to diversion programs. <br />Such changes would have been a significant <br />deviation from the practice of using the <br />formula to distribute LGA and could have <br />jeopardized the long-term stability of the <br />program. <br />For 2019 only, the 2017 Legislature <br />included a one-time payment acceleration <br />that will distribute 14.6 percent of each <br />city's 2019 LGA by June 15, with a second <br />payment of 35.4 percent on July 20 and a <br />final payment of 50 percent on December <br />26. For 2020 and beyond, LGA payments <br />will again be made to cities in two equal <br />installments on July 20 and December 26 <br />each year. This distribution occurs late in the <br />city fiscal year and can create short-term <br />cash flow challenges for some cities. <br />132 <br />Response: In order to reduce pressure on <br />the property tax, and to equalize property <br />tax bases, the League of Minnesota Cities <br />continues to support the existing LGA <br />formula as the appropriate mechanism to <br />distribute LGA resources and opposes <br />artificial limits on any city or group of <br />cities. In addition, the League supports <br />regular increases in the LGA <br />appropriation as well as the restoration of <br />the annual inflation adjustment to the <br />LGA program to move toward funding <br />the total unmet need of all cities. The <br />League also supports a permanent <br />acceleration of the annual LGA payment <br />schedule to assist cities with cash flow <br />needs. The League opposes targeted <br />reductions to specific cities as well as <br />reductions or offsets for local policy or <br />expenditure decisions. <br />The legislature should avoid creating <br />side -pots or special appropriations <br />through the LGA (Minn. Stat. ch. 477A) <br />program. If special circumstances such as <br />a natural disaster warrant additional <br />state assistance to specific cities, the <br />criteria for the additional aid should be <br />specifically enumerated and the <br />appropriation should be separate and in <br />addition to the appropriation through the <br />general LGA formula. <br />FF-5. State Charges for <br />Administrative Services <br />Issue: Currently, some state agencies have <br />wide discretion in setting the fees for special <br />services they provide to local governments. <br />Response: State agencies should be <br />required to justify their service fees or for <br />increases in existing service fees and not <br />charge more than what is fair, reasonable, <br />and proportionate to the cost of service. <br />Agencies should give adequate notice of <br />increases to allow local governments to <br />