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Local Government Aid - House Research Minnesota House of Representatives House Research House I Senate 1 joint Departments and C eminissicns j Bill Search and Status ! Staiutes, Law's, anti mule Page I of 5 1 e j Lhtrs ::n the'. ^u ;::'!d j Yiefa Ad van cad Search The History of the City Local Government Aid (LGA) Program • History of the LGA program • City LOA formulas • Curren city LGc• prog!ant • Current formula aid • Adjustments to_granafathered _ id base, 1993-2003 • Adjustments to city LGA made during the 2001 legislative session • Future changes,in city LGA • Distribution of LGA, 1975-2002 History of the LGA program The local government aid (LGA) program was part of the larger property tax reform passed in 1971 known as the "Minnesota Miracle." The program replaced a number of smaller state aid programs. Many of those programs were "shared tax" programs which distributed aid based on where the revenue was collected. The LGA program was an attempt to provide aid based on differences in "need" among local govemments. The original program distributed aid to all local governments except school districts. LGA payments to special tax districts were eliminated in 1979, county payments were eliminated in 1991, and payments to towns are eliminated beginning in 2002. Cities are the only local governments currently receiving LGA after 2001. A tape below shows LGA payments by type of government over time. City LGA formulas Although the city LGA formula has always attempted to account for city `need' in the distribution formula, there has been disagreement on how to measure "need." The formula went through several different phases between 1972 through 1989. Most of these phases used some variation of city spending, usually measured by the city tax rate or levy, as a proxy for "need." In addition, most of the formulas during this period guaranteed previous aid payments. A city's aid payment could only increase but could not decrease as city needs changed. It is this guaranteed or "grandfathered" amount that has led to many of the inequities that still exist in the LGA distribution. In 1990, the state shifted $73 million from city LGA to the school aid formulas, There was no formula used to distribute city LGA for the period 1991 -1993. Aids were "grandfathered" at the 1990 amount with proportional decreases and increases based due to budget cuts or local government trust fund surpluses. A new city aid program, called equalization aid, was instituted in 1990. It distributed money to cities based on their tax base per capita. The program paid out between $19 million and $22 million annually for the period of 1990 -1993. Return m too 3333. _333....... Current city LGA program The current city LGA program was enacted in 1993. A city's LGA payment consists of two parts: http: / /www.house.leg.state.mn. us /hrd/issinfothistlga.htm 1/5/2007 -10-