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Paynesville Press - June 11, 2003

City plans to cut spending to offset loss in state aid

By Bonnie Jo Hanson

Because of cuts in state aid, recently approved by the Legislature, the city of Paynesville will lose $188,000 in Local Government Aid over the next two years. Paynesville was expecting aid from the state to account for 41 percent of the city's budget. For 2003, the city's budget is $1.3 million with $561,000 expected in state aid.

Because of the state's budget woes, however, the Legislature recently announced $270 million in cuts to LGA statewide. Paynesville will lose $94,000 in aid in 2003 and again in 2004.

The city has anticipated cuts in state aid since last fall, when they were warned by the League of Minnesota Cities to plan for cuts from the state. The city also was threatened with the unallotment of the second installment of its 2002 aid payment but received this aid.

For 2003, the city approved raising property taxes by $7,000 to make up for part of a possible loss, and the city council directed the administration to find areas of spending to cut. The city was actually anticipating a larger loss in state aid for 2004, said city administrator Steve Helget.

While the city council has not made a final decision on spending cuts, the proposal from Helget would cut $93,200 from the following accounts to make up the loss this year: $28,700 from the EDAP fund; $27,500 from the liquor store fund, earmarked for the sidewalk fund; $10,000 from the parks capital improvement fund; $10,000 from the street maintenance fund; $5,000 from the administration capital improvement fund; $5,000 from the police department capital improvement fund; $5,000 from the police officer fund; and $2,000 from the tree inspection/compost fund, which was earmarked for new trees.

Other options, according to Helget, are one-time transfers from reserves in the general fund, the EDAP fund, the water and sewer funds, or the liquor store fund.

According to the city's recent audit, the city is doing well financially and has healthy fund balances, so, for now, the city can absorb the loss in state aid by using its reserves. According Helget, residents shouldn't notice cutbacks in services, and the city will not make any cuts to personnel.

Although cities can increase their tax levies to make up for 60 percent of the loss in state aid, Helget doubted that the city will resort to any more tax increases in the immediate future. But tax increases remain a long-range possibility.

Helget hopes it doesn't come to that, but he also doubts that the lost state aid will ever be restored. ̉I really don't foresee that we would try to make up all the loss in aid with taxes," he said. ̉The city's taxes historically haven't gone up significantly under similar circumstances."

Work on the city's 2004 budget begins in July. Then, the city can look at places to cut spending in 2004, said Helget.

Small cities in the area also face a reduction in state aid. According to the League of Minnesota Cities, St. Martin will lose nearly $7,000 in aid out of a total of $21,700 for both 2003 and 2004; Roscoe will lose $1,260 out of $15,700 in aid each year, and Lake Henry will lose $1,950 in aid out of $5,250.

Statewide, the Legislature made $122,000,000 in LGA cuts for 2003 and nearly $150,000,000 in 2004.

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