Tuesday, March 22, 2011

A (Very) Brief History of LGA Unallotment in Minneapolis

It seems that no article, discussion, or mention of Local Government Aid can go unaccompanied by the dreaded unallotment word. Being a newbie to Minnesota, I was unfamiliar with the idea and history of unallotment and its relationship to Local Government Aid - so I thought I’d better blog about it.

In Minnesota, the executive branch may use the unallotment law, “to unilaterally reduce spending under enacted appropriations to prevent a state budget deficit when revenues are less than anticipated.[1]” Unallotment can only be used if a deficit occurs after a balance budget is passed and enacted by the governor and legislature. Although certain money, like the state’s risk management fund, are exempt - state intergovernmental aid is fair game. In 2008 and 2009 Gov. Pawlenty famously used his unallotment power to take back local government aid that had already been certified.

Since I live in Minneapolis, I decided to check out how these reductions impacted the city. The graph above shows the difference between the certified aid amounts and those actually paid to Minneapolis as a result of unallotment. At the end of 2008, Gov. Pawlenty removed $13.2 million in aid from Minneapolis. Since the cuts came at the end of the year, the city had already spent the money and was forced to pay the difference with reserve funds. The following year, the Governor used the unallotment law to cut $29.9 million dollars from the FY 2009-2010 budget, over 20% of Minneapolis’s total state aid.

The city of Minneapolis points out that the LGA reductions, coupled with levy limits imposed on municipal governments, seriously impacted programs, like public safety. In 2003, State Aid accounted for 40% of the Minneapolis General Fund revenue. In 2010 it was only 19%[2].

For the rest of you new Minnesotans, next time you are rubbing elbows with Minneapolis city employees at a high-class soiree, you can now indignantly shake your fist about LGA unallotments right along with the group - and you will know why you are shaking it.

1 comment:

  1. To truly prevent unallotment, I hope the state can pass a balanced-budget with realistic forecasts. See the recent discussion on MPR: http://mprne.ws/4kC6k