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Paynesville Press - Feb. 26, 2003

Proposed state budget could have local impact

By Michael Jacobson

The budget proposed by Gov. Tim Pawlenty, which aims to solve a $4.2 billion projected shortfall, could have impacts for local government institutions if implemented.

The bulk of the governor's plan to solve the deficit is to spend the state's tobacco ($1 billion) and to cut state spending beyond forecasted levels ($2.85 billion).

In Paynesville, these spending cuts could hit local government bodies like the city, the hospital, and the school, as well as ordinary citizens, including farmers.

Part of the governor's plan is to cut aid to cities and counties. The city of Paynesville expects a $98,000 loss in state aid in 2003 if the governor's budget is approved as is. City administrator Steve Helget said the city would need to look at cutting deposits in its capital improvement funds (which are used to make capital purchases like fire trucks, office equipment, etc.) and tapping its reserves (of which the city has over $1 million in its general fund and nearly $5 million in cash assets, though the majority are in designated funds).

The city might also have to look at its discretionary spending, said Helget, like in recreation.

Even if the city could find a way to absorb the loss of aid in 2003 without a tax increase, the governor's proposal also calls for another $145,000 reduction in aid in 2004. While the city can cut services and tap its reserves for some time, eventually it would need to raise taxes if its state aid is reduced, said Helget. "In essence, (the governor is) shifting the burden to cities to raise taxes," said Helget.

The governor recommends a five percent cut in Medical Assistance and General Assistance Medical Care for inpatient and outpatient hospital care (along with increasing restrictions for qualifying for these programs) and four percent reduction to continuing care programs, not including nursing facilities.

For the Paynesville Area Health Care System, the financial impact of the proposal could be a $500,000 loss in revenue if enacted, said CEO Steve Moburg. "We sort of understood that these things were coming, but, boy, it sure hit us hard," he said. If the proposal becomes law, PAHCS will need to try its best to increase revenues in other ways and reduce expenses, said Moburg.

Schools expected no increase from the state this year, which is exactly what Paynesville would get, according to the governor's proposal. Funding for the Paynesville school would actually decrease by 0.7 percent under the proposal, which is pretty close to the zero increase they expected, said superintendent Howard Caldwell.

Local school funding will go up in 2003, but only because of the levy referendum passed by local voters in April 2002. State funding for education will increase only to match all the local levies now in place, said Caldwell.

Other school programs - Community Education and Early Childhood Family Education - lost some of their fund balances due to the governor's recent unallotment: $27,652 for Community Education and $9,935 for ECFE.

Both could also lose state aid, according to the governor's proposal. Community Education faces an 8.5 percent drop in state aid, which could cause it to raise fees, said director Matt Dickhausen. ECFE faces a loss of 32 percent of its state aid over two years, which could cause it to raise fees, too.

Farm Measures
The dairy processor assessment fee would be increased from five cents per hundredweight to seven cents per hundredweight and the dairy farm reinspection fee would increase from $25 to $45.

According to the governor, the current fee recovers only 46 percent of the actual expenses for inspections, while the increased fee change would cover 82 percent of the costs.

The governor recommends that ethanol producer payments be reduced from 20 cents per gallon to 10 cents per gallon effective July 1, 2003, and from 19 cents per gallon to 10 cents per gallon effective July 1, 2004.

Over seven years, this change would save the state $70 million.

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