Agenda - Council - 07/28/1981 - Laserfiche WebLink

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4) When the levy limit cities and towns are identified as either "high spending need" or "low spending need" cities and towns on the basis of their local revenue bases per capita, a modest shift in the percentage distribution of aid from one group to the other is observed from 1979 to 1990. When similar aid projections are compared with only the assumptions concerning the funding level being different, there is a shift in the percentage distribution of aid from "high spending need" cities and towns to "low spending need" cities and towns in those projections using the higher of the two assumptions concerning the funding level. This can be explained by the increased excess aid (over maximum aid levels for the cities and towns at their maximum aid level, which are typically cities and towns with high local revenue bases per capita, like the city of Minneapolis) that is redistributed to the cities and towns below their maximum aid level (primarily cities and towns with low local revenue bases per capita). When similar aid projections are compared with only the inflation level being different, there is a shift in the percentage distribution of aid from "low spending need" cities and towns to "high spending need" cities and towns under the higher of the two inflation rate assumptions. This can be explained by larger increases in local revenue bases (due to the inflation adjustment) for the "high spending need" cities and towns, resulting in more of them having their aid increases based on their preliminary or maximum state aid factors instead of their minimum state aid factors. Since few "low spending need" cities and towns receive their aid increases on the basis of their preliminary or maximum state aid factors, an increase in the rate of inflation has little benefit for them as a group. • 4