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The estimates reveal fairly significant changes for many cities.
(Published Jan 14, 2013)
The Department of Revenue (DOR) has released estimates for 2014 local government aid (LGA) payments to cities under current law.
There are fairly significant changes for many cities. For 2014 LGA, it seems the primary reason for much of the shifting is due to aid being based on the formula distribution for all cities for the first time since 2007. Most cities have been receiving aid amounts not based directly on their annual formula factors, so the changes in these factors over many years are being picked up all at once for some cities.
In the spreadsheet at the above link, columns show the certified 2013, the current law estimate for 2014 LGA, and the change in dollars and in percentage terms. The final column shows the per capita change from certified 2013 to estimated 2014. Cities are listed alphabetically, and there is a summary by region on the last page.
City officials should keep in mind that the spreadsheet shows estimates for 2014, not certified amounts. In mid-summer, when the Department of Revenue certifies the aid amounts, there is often a lot of confusion over the sometimes significant differences between the estimates and the certified amounts.
Data availability before certification is less of an issue than it was in the past because the formula factors are now lagged an additional year. Previously the formula relied on population estimates that became available in mid-July for use in an August 1 certification.
Now much of the data is lagged and is available before legislative staff and Revenue put together the baseline estimates for session. Consequently the estimates are much closer to certified amounts than in the past, but there will still be differences. Finally, the baseline estimates reflect no changes made by the Legislature during session. In most years there are at least some minor changes that impact distributions.
In addition, it is important to note that the LGA distribution to an individual city is partially based on the formula characteristics of all other cities. Although one city may experience a favorable change in one of the factors used to calculate aid, if the majority of other cities experience an even larger favorable increase in that factor, the first city could actually experience an aid reduction. This is partially due to the fact that the LGA appropriation is a set appropriation approved by the Legislature. If one city receives more LGA due to changes in its formula factors, then less remains for all other cities.
To combat some of these challenges, the calculations are now carried out using a rolling two-year average for each factor in the formula. This evens out some of the changes from one year to the next due to updates in the data.
LGA reform efforts
There have been two different groups examining aspects of the LGA program, in large part because some of the variables and data used to construct the current formula need to be updated. Gov. Dayton appointed 15 mayors to serve on the Mayors Tax Reform Advisory Group for Local Government Aid. That group held several meetings to develop a list of policy goals for the LGA program and to consider different methods for measuring need and capacity as well as different distribution methods, including a per capita system. The governor is scheduled to release his budget on Jan. 22.
The Legislature created the LGA Study Group back in 2008. That year, the group only met once. During the fall of 2011 the group was reconvened (with new membership) and met several times during 2012 to discuss problems with the current system, including volatility and complexity.
The LGA Study Group submitted a list of recommendations in December. Those recommendations included examining the special aid bases for cities, considering modifications to the maximum/minimum amounts by which a city’s aid can change year to year, stabilizing the appropriation, and using updated data as much as possible.
If you have any questions about your 2014 LGA estimate or about the LGA program in general, contact LMC staff members Rachel Walker, Lena Gould, or Gary Carlson (see right).