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Minnesota 2020 Journal: What’s in a Name?

February 11, 2011 By John R. Van Hecke, Executive Director & Fellow

“Local government aid” is misnamed. It’s not aid. It’s not a hand-out. It’s not a sweetheart give-away. It’s not bloated, out-of-control government. It is efficient state revenue sharing, allowing for lower-cost, locally supervised community services. And, because it’s gotten in the way of conservative “no new taxes” ideology, it has to go.

The name, LGA, really is a misnomer yet we cling to it, mostly out of familiarity and past practice. Conservative policy tacticians have brilliantly recast LGA as a politically motivated, unearned windfall for Minnesota’s cities. Every time we say “LGA,” as I’m doing now, we reinforce that interpretation. This is why the name has to change.

Minnesota succeeds and prospers because we invest in ourselves. Over the years, we’ve created community services that grow business opportunity, expand public safety and yield a high capacity, flexible workforce. We’ve learned that service delivery—the police officers, teachers, firefighters, snowplow drivers, emergency services workers, just to name a few who deliver the services—is most efficiently and effectively delivered at local levels. That’s why we don’t have a single state police force or why teachers work for individual school districts and not the Minnesota Department of Education. We spend less money and get more, better services following this model.

Minnesota’s revenue generation structure doesn’t quite work the same way. Minnesota’s constitution creates broad state authority to levy taxes. Local governments—Minnesota’s cities, counties and school districts—possess very limited taxation authority. Essentially, they can only tax property to generate the revenue that pays for schools; a police force or Sherriff’s deputies; keeps libraries open; or clears city, county and township roads and streets. Local governments may not, absent expressed permission from the State Legislature, tax transactions.

As post World War II Minnesota life’s pace accelerated and our economy took off, growing pressure for better schools, affordable healthcare, robust transportation infrastructure and economic development investments revealed the 19th century system’s shortcomings. Where property-based taxes paid for public infrastructure in 1858, by 1958, Minnesota, not to mention the world, had moved well past those limitations.

Minnesota’s public policy leaders faced a choice: allow local governments the authority to levy sales taxes or expand the range of taxed activities, sharing a portion of the increased revenue with local governments. Historically, one set of government leaders are always reluctant to voluntarily yield authority to another set so revenue-sharing eventually became law.

But, as with all political deals, it’s as good as long as it benefits the negotiating parties. The State of Minnesota holds the upper hand. Minnesota’s constitution only grants taxation authority to state government; it doesn’t compel revenue sharing. When state leaders, facing recession-driven budget shortfalls, looked for the least painful state budget cuts, LGA allocations fit their bill.

Consequently, local governments have endured regular, non-negotiated, one-sided reductions in shared public revenue. In turn, they’ve reduced their own budgets, trimmed and eliminated programs, and raised revenue through property tax increases, the only taxation option available. In most cases, property tax increases don't make up for lost state revenue. In turn, Governor Tim Pawlenty and his conservative policy allies preserved the state’s “no new taxes” policy doctrine. Minnesota’s wealthiest residents pay a lower share of their annual taxable income in taxes than the overwhelming majority of Minnesotans pay as a percentage of theirs. It’s a terrific deal for Minnesota’s very highest income earners; it’s a terrible deal for the rest of us.

Recently, non-metro chambers of commerce have publicly broken ranks with the Minnesota Chamber of Commerce. The State Chamber supports LGA cuts; out-state Chambers, appreciating the debilitating cost of losing state-shared revenue, oppose further cuts. The out-state Chambers know that cutting LGA achieves three outcomes: local property taxes go up; community services are reduced or eliminated; and lower state taxes for Minnesota’s highest income earners are preserved. In other words, much of Minnesota suffers so that a few can live well.

I appreciate rural and regional community leaders’ willingness to confront this inequity. I just wish they’d stop using the term “LGA.” Granted “state-community revenue sharing” doesn’t roll magically from the tongue but, if you think about it, neither does “LGA.”

A few years ago, cognitive linguist George Lakoff argued that progressives permitted conservative ideologues to define critical language elements, skewing public debate to conservative’s advantage. His popular book, “Don’t Think of an Elephant,” reveals the purposefully limited outcomes allowed by conservative policy language choice. Applied to “LGA,” the term “aid,” meaning assistance, suggests a discretionary disbursement. LGA is framed as a luxury rather than an efficient revenue transfer and service delivery policy.

LGA isn’t a luxury. It is a smart way of stretching public dollars. Schools, cities and counties repeatedly prove that they’re exceptionally good at community service delivery. The conservative insistence that government, in any form, is bad collapses before well-managed local services. Strong communities are an incredible value. They move Minnesota forward.

Oh, and lets start referring to it as revenue sharing.

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