Reinventing the Minnesota Miracle
In the 1970s, our state was the envy of the nation. Our "Minnesota Miracle" gave local municipalities relief from skyrocketing local property tax rates by sending them state dollars — aka Local Government Aid (LGA) — to help them pay for essential city services while freeing up more aid for education.
It was a system that worked for decades. It was a compact between state government and the cities and towns it served — that we can have quality schools, parks and libraries, safe infrastructure and top-notch law enforcement and first responders when we work together.
In the years since, things changes. No one ever said our libraries were open too many hours or our police were benefiting too much from state aid. No one ever went to voters to argue for larger class sizes or fewer extracurricular activities.
But over the past 10 years, that's what Minnesotans got. Some argued that cities and schools would be fine adapting to doing more with less. Starting in 2003, cities and towns saw their cumulative LGA slashed by more than a billion dollars. That, in turn, forced communities to tighten budgets, cut services and, in many cases, raise property taxes on homes and businesses. For every dollar cut in LGA, property taxes increased 67 cents.
It required hard — and often unfair — decisions to be made.
This past session of the Legislature, we said "enough" to piling on our institutions and schools, which already were strapped. We needed to reinvent the Minnesota Miracle.
We created a new formula for LGA, and early returns are promising. The new formula makes adjustments to an individual city aid based on its "aid gap," or the difference between its current aid and its unmet need as measured by the formula.
The proposed formula uses three different sets of data to measure "need" for LGA for any given community based on community size:
- For small cities with fewer than 2,500 residents, need is $410-$630 per capita, depending on population.
- For medium cities between 2,500 and 10,000, need per capita is based on three factors: percent of housing built before 1940, household size and percent decline in population, if any, from the highest census population count in any census on or after 1970.
- For large cities with populations over 10,000, need per capita is based on three factors: jobs per capita, percent of housing built before 1940 and percent of housing built between 1940 and 1970.
The new formula is stable, easier to understand and predictable. Most importantly, the formula provides property tax relief to communities with the greatest needs. The neediest cities will get proportionately larger increases. And regional centers across the state receive more aid to meet their greater needs.
The new formula also allows for increases to LGA based on inflation as new money is appropriated for the program each biennium.
Duluth is both a large city and a regional center. This change in the formula and the influx of new monies will put Duluth on track to regaining what it lost in the past decade. The city council and the administration will know what is coming and budget appropriately. No longer will there be service cuts and/or layoffs due to reductions in aid. Local government aid benefits cities, but it also benefits all of Minnesota.