When it comes to state funding, Christmas comes early for cities and counties across the state of Minnesota. Checks for increased Local Government Aid and County Program Aid were mailed out this week.

Returning to heights unseen since 2002, the state Legislature approved a tax bill in April that raised LGA and CPA funding by $26 million in 2020, with a further $4 million bump to be doled out the year after. That would bring total LGA expenditures for 2021 to about $565 million and total CPA expenditure to about $260 million. These funds have been largely static since the beginning of the millennium, or actually shrunk in the wake of the Great Recession.

This is a boon for local municipalities, as these funds can be allocated for virtually any purpose -- everything from infrastructure improvements, to debt payments, to bankrolling social services -- and LGA funding comprises a significant portion of some city budgets. While funding estimates are being evaluated by city staffs, the allocations are expected to be certified by the end of the month.

During a conference call with Greater Minnesota media Tuesday, July 23, Gov. Tim Walz characterized LGA funding -- and, by extension, a return to early-century levels of funding -- as the engine behind the Minnesota Miracle, in which the state historically has found economic success by hitching urban and rural interests together.

“I’m really proud of the state Legislature for the piece of legislation that brought that back up to 2002 levels,” Walz said. “(For cities), that may be adding a police officer, a construction project, a park. We’re starting to see the fruits of our labors when you get a budget where we all work together for one Minnesota.”

Walz said resistance to a well-established and popular funding proposal was stronger than he ever anticipated. He hinted at an urban-rural divide -- namely, he noted, there were those who were fine with LGA increases for the Twin Cities metro but balked at allocating these funds to Greater Minnesota communities.

Ron Johnson -- the president of the Coalition of Greater Minnesota Cities and a member of the Bemidji City Council -- lauded the legislation. Increasing LGA funding has been a stated priority of the coalition this legislative session.

“I’m ecstatic that the Legislature and governor were able to work together to make that goal a reality,” Johnson stated in a May 25 news release. “Cities all across the state, and especially in Greater Minnesota, are going to benefit from this important investment.”

Pequot Lakes City Administrator Nancy Melecha said the city receives roughly $20,000 annually in LGA funding, but declined to comment on these allocations until 2020 funds are certified by the state at the end of the month. The Dispatch reached out to city staff in Crosby and Brainerd, but requests for comment were not returned by deadline.

According to budget workshop documents, the city of Brainerd looks to receive an estimated $4,442,317 in LGA funds for 2020 -- a projected $235,215 increase over 2019. For comparison’s sake, the total tax levy for the of Brainerd was $5,895,572 in 2019. Final allocations will be certified on July 31.

Along with Pequot Lakes, Brainerd and Crosby, Cuyuna, Deerwood, Ironton, Jenkins, Pequot Lakes, Riverton and Trommald all receive LGA funding from the state.

Nuts and bolts

However, Walz did express some missed opportunities and regrets that emerged in the wake of the 2019 legislative session.

One area was tying LGA and CPA funding to annual inflation rates to offset the declining value of the dollar and rising costs. He said Republicans weren’t favorable to that provision in the only split state Legislature in the union.

“In 2021, I think we need to have a really detailed conversation about tying local government aid to inflationary costs,” said Walz, who described the proposal as a “heavy lift.” “I think there’s a desire for it.”

Pointing to a history of Republican-led initiatives to remove larger cities from LGA funding on the ground it’s an unnecessary allocation for stronger municipalities, Walz said it’s a discussion he’s willing to have -- though, he noted, he’s not singling out particular cities so much as he’s looking to “modernize” the formula in a way that better pinpoints areas of weakness across the state.

“This topic was a little dangerous,” said Walz, who conceded there needs to be another look at cities with higher tax bases and cities that are left out. “It tried to put the first-ring cities -- Minneapolis and Duluth -- against the Greater Minnesota cities. That’s not the point of what we’re trying to get to.”

County concerns

In terms of CPA funding, Crow Wing County Administrator Tim Houle expressed gratitude, but noted these increases only look to address a fraction of the monetary needs the county has.

“It’s gonna help. Anything always helps, but let’s have some context. It’s a $200,000 increase in a $95 million budget,” Houle said of the county’s finances. “It will help, but will not relieve all the areas of pressure that we are feeling.”

In terms of areas of pressure, Houle pointed to rising rates of child protective services, rising rates of drug abuse and related social work, underfunded points of untreated mental health and mental health services for incarcerated individuals. Between 2017 and 2019, the costs for out of home placements -- namely, when the county intervenes in domestic cases and removes children from unsafe or detrimental environments -- rose by $3 million, he noted.

Increased funding is all well and good, Houle said, but Minnesota has a long way to go before these allocations alleviate burdens the state imposes on counties to fund, administer and enforce state-mandated programs and services.

Walz expressed solidarity with Houle’s assessment, pointing to funding disparities between the state and counties as an issue St. Paul needs to tackle in coming years. He said this may be a combination of streamlining services and more state support.

“Total agreement,” Walz said. “I think we’ve got a great arrangement in Minnesota in that our counties are basically our implementers when it comes to human services, but our counties are being burdened. They’re right. We’ve got increased CPA funding on the front end, but there’s no grounds for a victory lap.”