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REVENUE SOURCES <br />RS I. State Aid to Oties (A) <br />Stale aid and property tax relief programs for <br />cities wens originally established in <br />exjunction with the introduction oi the state <br />sales tax to reduce the reliance x the property <br />tax. These programs have allowed cities to <br />provide an adequate level of services to <br />Minnesotans, regardless of local property <br />wealth or service overburden factors. <br />Certainty and stability in the state aid system <br />remain a major goal for city officials. <br />However, in three of the past fxr years, state <br />aid originally certified to cities during their <br />budget process has been retroactively cut. <br />When this occurs, city officials have few <br />optixs but to reduce essential city services <br />and delay necessary maintenance programs. <br />To ensure certainty and stability, the League <br />recommends the following policy guidelines if <br />changes are made to the state aid system: <br />A. Local government aid (LGA) should <br />remain an essential component of the <br />property tax system. The program should <br />annually grow along with the growth in local <br />government trust fund (IXITF) revenues. <br />LGA is an important source of non-property <br />tax revenue for cities. Annual growth in the <br />appropriation for LGA is necessary to prevent <br />increased or excessive city reliance on the <br />property lax. The League continues to <br />support its 1993 LGA formula proposal and, <br />guided by the principles of that formula, will <br />support formula changes that will improve the <br />stability or the integrity of the program. <br />B. The League opposes the conversion of <br />city homestead and agricultural credit aid <br />(HACA) or LGA to school aid. <br />Converting city HACA or LGA to schxl aid <br />cxid force cities to dramatically increase their <br />property taxes in order to maintain suffictcni <br />operating revenues. In addition, due to <br />exstant pressure to increase the resxrces <br />available for schxls, there is no assurance <br />tlttt exversix of city HACA or LGA to <br />school aid wxld result in permanent <br />redttctixs in school levies or 1 avc a neutral <br />impact X the taxes paid by Io<.'al taxpayers. <br />C. The League supports restoring the HACA <br />growth factor for cities. <br />The 1993 Legislature repealed this provision <br />for cities, schools, townships, and special <br />taxing authorities. However, counties <br />continue to receive additional HACA under <br />this provision. The HACA growth factor <br />assures mat the property tax relief provided by <br />the state through the classification system is <br />paid by the state and not provided by shifting <br />tax burdens to other types of property. <br />RS-2. Local Government Trust Fund <br />(A) <br />The 1991 Legislature established the local <br />government trust fund (LG I F) to create a <br />dedicated and stable source of revenue for <br />necessary state properly tax relief programs. <br />However, since its inception, LGTF revenues <br />have lyen the target of budget balancing <br />efforts of both the Governor and the <br />Legislature. With uncertainty surrounding the <br />1994-95 biennium budget, the LGTF is <br />begirming to .isemble the unstable and <br />undesirable system it was designed to replace. <br />The League recommends the following policy <br />guidelines if changes are made to the local <br />government trust fund: <br />A. The League continues to support the <br />local government trust fund (LGTF). <br />However, this support is contingent on the <br />1994 City Policies and Priorities