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The Infancy of LGA

November 18, 2013 By Tom Berg, Guest Commentary

Editor's note: Governor Wendell Anderson and a bipartisan legislative coalition transformed a 1970 Citizens’ League Policy paper into what we know today as LGA, a state revenue sharing mechanism that's a key pillar of the Minnesota Miracle. It’s one of the many historical policy stories in a new book by Tom Berg, a state representative from Minneapolis at the time who, along with his colleagues, is responsible for shaping Minnesota into a leading state for education, health care, economic development and public safety.

The following excerpt from Minnesota's Miracle: Learning from the Government That Worked is being used with permission of the University of Minnesota Press, Copyright 2013 by Tom Berg.

The 1967 legislature under Conservative Caucus control had passed permanent and significant property tax relief for businesses and had instituted a general sales tax for the first time in Minnesota. The legislature had also passed property tax relief for homeowners, but this relief was not mandated to be permanent. And as had been predicted, property taxes on homeowners and farmers soon started going back up. Complaints and protests mounted throughout the state. By the time the 1970 gubernatorial campaign got under way, homeowner property taxes had become a significant issue for the candidates.

State senator Wendell Anderson, the DFL candidate, talked constantly about the permanent property tax relief for businesses and only temporary relief for homeowners. He pointed out that this had been passed by the Republican-controlled 1967 legislature. He said he would provide relief for the homeowners. Doug Head, the state attorney general and Republican candidate for governor, was more vague; he talked about crime and violence, reduced reliance on real estate taxes, and “better balanced economic growth.”

During the summer and fall of 1970, a group of citizens had begun a detailed study of Minnesota’s complex system of distributing state revenue. This group was part of the Citizens League, a well-respected eighteen-year-old nonpartisan organization devoted to studying and recommending policies to solve various state and local problems. The league issued reports on their findings and their proposed solutions. The league did not endorse candidates, but it did actively advocate for the implementation of proposed solutions. The league was open to all, although it consisted largely of corporate and business folks, a few labor people, and a good number of students and policy wonks.

The rather boring-looking and boring-sounding report from the league titled New Formulas for Revenue Sharing in Minnesota was to become a key catalyst in deciding who would be Minnesota’s next governor, and in the development of a dramatic change in the state’s fiscal policy.

...On September 1, 1970, the Citizens League’s board approved its report. The report said that a “broad look” at state policy for the fiscal affairs of local government was “urgently needed.” It noted that “political resistance to higher taxation is rising” and that the state legislature should play a “central role” in determining which levels of local government should levy taxes and what limits should be placed on these local units of government. The report then called for a reduction in local property taxes and a replacement of most of the local property taxes with state-collected taxes. The state was asked to “give priority attention” to aids to municipalities and to schools. The report’s recommendations for more state action raised eyebrows in tax, local government, and political circles.

...As the campaign progressed, the news media continued to cover the issue extensively, and more and more people began to realize that the legislature’s actions could have a significant impact on their property taxes. People also realized that the method of distribution of state money was critical to their local municipality and school district. More people began to pay attention to such arcane terms as mill levies and assessed valuations. With less than a month to go, a headline in the Minneapolis Tribune raised the issue to the top of the political pile: “School-Tax Proposal May Decide Governor’s Race.” During the last four weeks of the campaign, Anderson fueled the fire over too-high property taxes and kept talking about the need for a more fair system of aids for school districts and municipalities.

Finally, on November 3, the voters decided, and Anderson won with 54 percent of the vote. The Anderson administration quickly realized that the Republican escalation of what had started out as just an idea in Anderson’s mind gave the new administration a politically acceptable vehicle to make sweeping changes in the state’s tax and revenue distribution policies. Anderson claimed the election victory gave his administration a “mandate” to do something about the “fiscal mess” left by the previous Republican administration and the Conservative-controlled legislature. While Republicans had talked about Anderson’s “plan,” in fact, no plan existed. There was merely a concept to reduce property taxes and to implement a revenue distribution system that was thought by the governor to treat school districts and local governments more fairly.

Tomorrow we'll continue the story about how these ideas became lasting policy.

Tom Berg is a lawyer and former state representative from Minneapolis.

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