Pawlenty: Time to tap reserves
By Rae Kruger and Deb GauMARSHALL - Gov. Tim Pawlenty didn't bring an umbrella, but he made his point clear Thursday during an interview on a visit to Marshall.
One reason cities, counties and school districts have reserve funds is to serve as the rainy day fund or the fund for an emergency, Pawlenty said.
It's raining, Pawlenty said.
"If not now, when?" Pawlenty said of a time that demands local governments tap into reserves to help offset difficult economic times.
Pawlenty, in Marshall for a Thursday morning chamber event, cited the mayor of Wadena who recently said a cut of about $100,000 in local government aid would mean his city would need to cut police or fire or safety services. Wadena has a budget reserve of $1.2 million and why couldn't $100,000 be taken from that reserve, Pawlenty said.
Cities need a reserve fund, Pawlenty said, but does Marshall need about $5 million in a general budget reserve fund?
"If you're sitting at $5 million in reserves...," Pawlenty said.
Marshall financial director Tom Meulebroek said the city's general fund reserve was about $5 million at the end of 2007, which is the year for which the most recent audit was completed. Meulebroek said the city typically sets its reserve fund at one-half the expenses for the upcoming year. The city receives LGA payments twice a year and generally receives the bulk of its tax money in two payments, Meulebroek said.
The reserve money must be in place to cover the city before LGA and tax money are received, Meulebroek said.
It's not as if there is $5 million available in a pot to use, Meulebroek said. The money is reserved for a specific purpose, he said.
Pawlenty has proposed a 5-percent reduction in LGA as part of his proposed budget for the next two years.
It's more likely the cut will be 2 or 3 percent when the legislative session ends, he said.
While it is true that more local government aid dollars go to big cities, Pawlenty said, rural areas aren't necessarily being hit harder by reductions. Cities with populations less than 1,000 were exempted from local government aid cuts, or the unallotment of expected LGA funds were made in December, Pawlenty said.
Pawlenty said it's generally larger, growing towns that rely too much on LGA.
"The idea of LGA was to level the playing field for smaller or poorer communities," Pawlenty said. However, over time the program has "morphed" into something different.
"It enables growing communities to live off state aid at a level that is a concern," he said.
While state Democrats have yet to propose a budget, Pawlenty does know the federal economic stimulus package will have a definite impact on the state budget the next two years.
About $47 billion in federal stimulus package funds went to roads and transportation. Of that amount, Minnesota will receive $400 to $500 million - enough for about a year's worth of road projects, Pawlenty said.
This means the state will have a greater capacity for projects, Pawlenty said, although the money will be distributed through aid formula and the Minnesota Department of Transportation.
MnDOT was able to move some projects forward with stimulus money because those projects met federal requirements, such as the Minnesota Highway 68 project between Milroy and Wabasso, Pawlenty said.
Pawlenty told the audience at the chamber event he would have liked to see more money included for roads and bridges in the federal stimulus package.
The federal stimulus package also includes requirements that mean the state won't make cuts or changes in Medicaid programs.
The 85,000 people his proposal would have removed from Medicaid won't be cut, Pawlenty said. Although his proposal would have resulted in people losing Medicaid, in the long term, more people would have qualified, he said.
The stimulus won't prevent the state from pursuing some changes in state health care and human service programs, Pawlenty said.
The state needs its health care programs to focus on preventive care and maintenance, Pawlenty said.
When hospitals receive federal money the federal government requires hospitals to not reject patients at the emergency room, Pawlenty said.
That's not the best option for someone's first choice in health care, he said.
Pawlenty said he's been trying to promote joint human services as one way for Minnesota to reduce costs.
Pawlenty's budget proposal included incentives for the formation of regional health and human services organizations, similar to the ones already in existence in parts of the state. The incentives include fewer funding cuts in exchange for forming a regional human services group covering an area with a population of 250,000.
"You wouldn't need an office in each county," Pawlenty said.
Cooperatives could make use of satellite offices or other measures to cover their service areas.
So far, Pawlenty said, there haven't been any definite responses to the proposal.
Pawlenty said the scenario outlined in the proposal - 15 human services regions with a population of 250,000 - isn't the only acceptable one.
"Fifteen isn't the magic number. The point is to make it significantly better than it is now," he said.
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Anna1899
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03-14-09 10:54 AM
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As a former city clerk it is clear why the reserve is in place. The problem with our current situtation is too many spend live paycheck to paycheck and any crisis can put you out in the street. Do we want our cities to be in that situation? Wake up Governor-and pull your head out of the sand.
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merioncooper
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03-13-09 4:41 PM
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Typical of the governor, shoving real budget-making decisions down to counties and cities. I agree there should be more consolidation of services at the city and county levels -- maybe even merge some counties entirely. But until that happens, the cuts in LGA leave cities with two choices: Cut staff and services, or raise property taxes and fees. Marshall started charging $150 for police funeral escorts and there was a large howl. If the streets aren't plowed fast enough, people whine. If you are going to force cities to cut, Marshall should try these -- they r used by the fewest people. Close the airport, close Legion Field bb park, close city street dept garages (share with county). City could also sell downtown park, charge rural kids 3x as much for MCS activities.
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Lars63
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03-13-09 4:40 PM
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Too bad the shape the world is in right now and has been for some time. The hospitals, counties, townships and ect. all have to show a red balance in their budget to get federal or state aid, would it not be nice to be self-sufficent and not have to be the pawn. But I guess self-sufficent is not a good word to use now days.
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Deppfan
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03-13-09 3:01 PM
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If you read the story, it says what the specific purpose is: "The reserve money must be in place to cover the city before LGA and tax money are received, Meulebroek said."
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Lars63
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03-13-09 1:43 PM
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Maybe the Governor needs to take some lessions FROM Marshall, Mn. instead of telling us what to do with our money. Where are the States reserves and what has he done with them?
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realworld
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03-13-09 1:26 PM
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Marshall has a 5 million dollar reserve fund and it's reserved for a specific purpose according to a city official. Wonder what the specific purpose is???
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