House Property Tax Division Considers Three Local Government Aid Bills

March 21, 2022

The three bills propose increases and other changes to the local government aid program.

The House Property Tax Division considered three bills on March 18 that would modify the local government aid (LGA) program, including HF 4064, a bill that would increase the LGA appropriation by $28.2 million to $592.6 million, which is 5% more than the current law level.

The committee also discussed HF 3794 (Rep. Dave Lislegard, DFL-Aurora), which would add $90 million to the existing LGA formula, and HF 4155 (Rep. Jerry Hertaus, R-Greenfield), which would increase the LGA appropriation and create a minimum distribution for all cities.

Update of LGA formula

HF 4064, authored by Rep. Cheryl Youakim (DFL-Hopkins), reflects the research work on updating the LGA formula conducted by the League of Minnesota Cities, Metro Cities, the Coalition of Greater Minnesota Cities, and the Minnesota Association of Small Cities.

These city organizations conducted the research at the request of key House and Senate Taxes committee members. Representatives from each organization testified at the hearing on the research and recommendations contained in the bill to update the LGA formula.

The LGA formula was last updated in 2013 and has been reviewed roughly every 10 years. The recommendations would update the factors used to statistically determine the “need” definition for each city to reflect newly available demographic and fiscal data.

Read a complete description of the formula factors in the summary of HF 4064

LGA increase of $90 million

HF 3794 would use the existing LGA formula factors developed in 2013 to distribute an additional $90 million. Bill author Rep. Lislegard stated that the $90 million increase would cover roughly one-half of the current formula’s definition of city “unmet need” as defined in the current formula.

LGA increase, plus minimum distribution

The third bill considered at the hearing was HF 4155. As amended by the committee, the bill would increase the LGA appropriation by $20 million. It would also set aside 2% of the total appropriation that would be distributed in an alternative per capita formula that would assure all cities receive a minimum distribution. The alternative distribution would be capped at $200,000.

Read a summary of HF 4155 (pdf)

Comparison by House Research

House Research prepared a single spreadsheet that compares the distribution to each city under each of the three formulas. The spreadsheet also includes a column that shows the LGA payment to each city under a combined HF 4064 formula update and the HF 3794 $90 million appropriation increase.

See the House Research spreadsheet (pdf)

Bills laid over

The three bills were laid over for possible inclusion in the House Property Tax Division report. The committee will complete its hearing work soon and begin the process of compiling that set of recommendations in the coming weeks.

For more background information on these bills, read a previous article.

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