Walz uses State of State to call for new story

Gov. Tim Walz delivers his State of the State address inside the House Chambers at the Minnesota State Capitol in St. Paul on Wednesday, April 3, 2019.

In the ideal world, said Minnesota Gov. Tim Walz, the 2019 session was just the start for better funding distribution to Greater Minnesota.

Local Government Aid and County Program Aid were increased back to 2002 levels by the Legislature this year, but in a conference call Tuesday, the governor said he wants to see the formula modernized and equalized in coming sessions.

“One of the things we didn’t get done was tying LGA to inflation,” Walz said, noting local governments are going to experience increased costs on projects. “We have to pull people in and have that conversation. I think there’s a desire to do that.”

Desire and follow through will be two different challenges. Walz said he was surprised by the resistance to increasing LGA funding, which was rolled back after 2002 when budget forecasts showed a looming deficit.

Increasing aid to Minnesota cities and counties was a priority for the governor and other DFLers on the campaign trail in 2018, and a noted goal at the onset of the session. On the Iron Range, Rep. Dave Lislegard, DFL-Aurora, authored the bill to not only increase LGA but also boost the region’s Taconite Municipal Aid share. Those two efforts, along with CPA, were included in the final state tax bill.

Arguments against increasing funding brought questions about whether local governments in Greater Minnesota spent the money frivolously when it was at 2002 levels, a notion Walz dismissed.

“I was pushing until the very end because there are those who don’t see it was warranted,” he said. “I see it as a very effective delivery of taxpayer dollars to the local level. They were fine with tax dollars going to St. Paul. So why not trust the city council in Virginia?”

Soon enough, the state will get a glimpse at how local governments choose to spend their funding increase. This week marks the implementation of many funding measures passed by the Legislature, including LGA, CPA and efforts to equalize school funding.

That real world impact, Walz said, is something he’s excited to see, pointing to an 11.4 percent increase in LGA funding to Grand Rapids.

“That may be adding a police officer, a street project or a park,” the governor said. “Local governments know how to use that.”

Formula change will be a lift

Walz recognizes the resistance to LGA and CPA increases this year means an uphill battle to reform and change the formula for future years. This is especially true, he added, to stop future lawmakers from freezing it up again if budget forecasts show declining revenues.

What that reform looks like will be complicated.

In the past, Republican lawmakers have attempted to boot out larger cities from LGA benefits, which according to the governor, unnecessarily pits Minneapolis, St. Paul and Duluth against smaller cities.

While he isn’t going into the formula discussion looking to kick those cities out — calling it a frustrating conversation, but “not what we’re trying to get to” — Walz understands its an inevitable discussion. Instead he’s focused on including more communities and protecting current levels through modernization.

“It will be a high and heavy lift for me to get inflationary add-ons,” Walz said. “I think it’s the firewall against the backsliding that will happen. There has to be a relook at this because there are some communities that are left out. I’m not willing to frame that discussion around kicking out Minneapolis and St. Paul.”

Counties caught up, but behind

Minnesota counties also experienced a boost in their state aid this session, but many are still feeling the pinch of unfunded state mandates in their budgets, primarily in the Public Health and Human Services department.

St. Louis County, for example, will receive $13.6 million from County Program Aid in 2020, a $1.3 million increase from 2019. Initial budget proposals from the PHHS department show a 2.7 percent (or $1.26 million) increase for the coming year. Not all the CPA money will be earmarked for the department, but it has seen outsized budget increases over the last few years as the opioid epidemic, out-of-home placements and overall substance abuse cases have risen.

Walz said the state relies heavily on counties, especially PHHS departments, to be implementers of state mandates — a number of them unfunded. While he was happy to catch the counties back up, future sessions need to focus on further easing the burden sent down from the state level.

“We need to go back and do deep dives into our agencies,” Walz said. “We did the front-end work on CPA, but there is no victory lap.”

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