2 MN Cities Among Those With Biggest Cuts To State Aid

Rochester and Minneapolis have both lost a large chunk of their local government aid over the last few years, resulting in spending cuts.

Rochester and Minneapolis were recently ranked on a list of the 10 U.S. cities that have seen the largest decrease in state aid as a percentage of their general city funds.
The share of Rochester’s budget that comes from state funding dropped by more than 10 percentage points between 2007 and 2012, while Minneapolis saw a 9 percentage point drop, according to a report by the Wall Street Journal, which cited data from Merritt Research Services.
The study measured the 250 largest cities in the country and Rochester experienced the fourth largest percentage point drop. The only cities with larger falls were Chula Vista, California (14.5 percentage-point loss); Henderson, Nevada (11 points); and Westminster, Colorado (10.3 points).
A decrease in state aid usually results in overall spending cuts, often translating to government employee layoffs and less attention paid to public services and infrastructure, the Wall Street Journal said.
Looking further back than 2007, the decrease in the share of state aid for Minneapolis and Rochester becomes even more dramatic. According to city documents, which revealed slightly different statistics than the Wall Street Journal, Rochester’s local government aid as a percentage of its total operating budget has dropped from 20 percent in 1990, 13 percent in 2000, and ending at just above 5 percent in 2013.
Rochester, however, expects its state aid to increase in upcoming years. According to Dale Martinson, the director of finance for the city, Rochester anticipates its state aid to increase by about 36 percent, from $5.1 million to $6.9 million, for 2014. He said, however, that the increase will be offset with a limitation on property taxes.
While Rochester has seen a steady decline in its state funding, Minneapolis’ funding has been more erratic. According to city filings, state aid made up about 27 percent of the general fund from 1997 to 2003, until the state cut aid by $35 million in 2004, dropping its portion of the general fund by about 17 percentage points.
The city rebounded in 2006, however, when the state legislature increased aid by about $15 million, bringing the percentage of the city’s total fund back to 27 percent. Since then, however, it has steadily decreased to 17.6 percent in 2012.
Whereas Rochester is optimistic about its future, the outlook for Minneapolis appears less bright. According to city documents, Minneapolis expects to see an annual reduction in state aid of about $0.3 million after 2013.