House Committee Considers LGA Technical Fix Bill

Under the 2013 LGA formula changes, a drafting error will impact future LGA distributions if not corrected.
(Published Mar 10, 2014)

A bill to address a drafting error in the 2013 reforms to the local government aid (LGA) system was heard in the House Property and Local Tax Division on March 5. The bill, HF 2465, was introduced by Rep. Ben Lien (DFL-Moorhead), the chief author of last year’s LGA reform and funding bill.

The drafting error would most directly impact the cities with calculated formula “need” that is lower than their current LGA distribution. When the LGA formula was approved last session, the Legislature included limits on the maximum reduction these cities could experience from year-to-year in order to gradually phase in reductions over a period of years. The law includes a provision that was intended to limit the annual reduction to the lesser of $10 per capita or 5 percent of the city’s previous certified property tax levy.

However, under the drafting of the law, a city that should have the decrease of its LGA distribution phased in would experience a proportionately larger decrease as the total LGA appropriation is increased.

The correction will not impact the LGA distributions for calendar year 2014. Under last year’s bill, no city would experience an LGA reduction in 2014 based on the new formula parameters.

The bill was laid over for possible inclusion in the report of the Property and Local Tax Division of the House Taxes Committee. The division report would then be forwarded to the full House Taxes Committee and possibly included in the House omnibus tax bill. The Senate companion bill, SF 1962, is authored by Sen. Roger Reinert (DFL-Duluth). That bill is expected to be heard in the coming weeks.

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