Bemidji ponders impact of potential loss of LGAby Tom Robertson, Minnesota Public Radio
Cities across Minnesota will be watching closely as Gov. Tim Pawlenty releases his plan to balance the state budget. The state faces a massive $4.8 billion deficit. Many city leaders worry the governor's plan will include huge cuts in Local Government Aid.
That state aid program is a big deal for some communities. In Bemidji, Local Government Aid accounts for more than 40 percent of the city's budget.
City administrators in Bemidji are just beginning what's expected to be an agonizing budget-cutting process.
Bemidji, Minn. — Bemidji City Manager John Chattin can only guess what sort of state aid cuts his city will face this year. He's heard predictions that aid payments to cities could be slashed by as much as half.
Chattin says local elected officials have faced cuts before, but probably nothing like what's to come.
"I think they've been wrestling with it for the last few years without ever anticipating that it could actually get worse," Chattin said with a laugh, "and here we are. It's actually going to get worse."
This year could very well present the most daunting challenge in Chattin's 17 years in public administration.
Like many Minnesota cities, Bemidji depends on Local Government Aid or LGA to make up for a low property tax base. The aid helps bridge the gap between the ability to raise tax revenue and the cost of providing services.
The last round of cuts to LGA was in 2003. Back then, Bemidji and other cities were forced to trim staff, put off road repairs or postpone big purchases like fire trucks and police cars.
With the level of cuts expected later this year, Bemidji is in uncharted territory. For starters, staff want to cut half a million dollars from the city's roughly $9 million budget over the next few months, just to get ready.
City finance director Ron Eischens has gone line by line through the budget. The problem is, he's not finding much excess.
"We've certainly trimmed our operating budgets the last several years to a point where there isn't a lot of fat left," said Eischens.
There's one thing that sticks out in all those pages and pages of numbers, though.
Nearly 70 percent of city costs are related to people. Salaries and benefits are expensive. Eischens doesn't like to think about it, but he knows the city might have to consider layoffs.
"That's certainly the ugly word in this scenario," said Eischens, "but we're looking at all of our possibilities before we get to that point."
The city is talking with local unions to try to get some concessions. One goal is to change contract rules so that the city can cut the number of overtime hours it pays in half.
City workers will feel the pinch in other ways when union contracts are up for renewal at the end of this year. Chattin says wage freezes for 2010, and possibly the year after, are inevitable. Job losses may be unavoidable, too.
"I think in the end we will, whether it's through attrition or, hopefully it's not layoffs, but possibly layoffs, we will have fewer staff going forward," Chattin said. "If one assumes that we are efficient currently, then that has to tell you that services are going to diminish in the future."
Chattin says he and his finance director know they have to maintain vital services like police and fire protection. It's too early to say how public safety and other city services will be affected by cuts. But Chattin says it's likely Bemidji and other cities won't be able to afford to offer the same level of services people are used to.
"I think that all the cities and counties understand that that is something that is simply, it has to happen," said Chattin. "I mean, we have to bite the bullet as well as everyone else in the state. We have to be up to the challenge, don't we? I mean, we don't have any choice. If your paycheck isn't there, you find a way to make ends meet on the pay you get."
Chattin and Eischens have been keeping lists of money-saving ideas, some submitted by city employees.
In just a few weeks, they'll present those ideas for the first time to the Bemidji City Council. That's when the real tough decisions begin.
- All Things Considered, 01/26/2009, 4:50 p.m.