Cities and Towns Must Plan for Diminished State and Federal Funds

One of our fundamental goals at Strong Towns is to call attention to ways our communities are vulnerable to economic and financial stress due to development patterns. How we have developed our cities and towns has much to do with what, through local and state government decisions, we choose to support and subsidize.

Some of you may respond that subsidies don’t go to our small towns, or to big cities, or to this region or that. You’d be wrong. Over 90% of Minnesota’s cities (the definition of which includes small towns and central cities) received State General Purpose Aid in 2009, to support purposes ranging from public safety to streets and parks. In fact, as the graph illustrates, Minnesota cities rely on federal and state funds to varying degrees, as well as property tax – a subject for the future.

Sources: Office of the State Auditor; Minnesota State Demographer; Strong Towns analysis.


Some readers may note that as a state we have a vested interest in spreading resources across Minnesota. We point to the importance of school funding distributed to districts based on remoteness or concentrations of poverty, or revenue sharing in the metro area under the fiscal disparities program, and agree. 

However: Dependence on state and federal funding – regardless of arguments of equity and shared interests – does not comprise a sustainable fiscal or economic development strategy. We wrote last week about Minnesota’s structural budget problem; the Center on Budget and Policy Priorities reports that 35 states have similar challenges this year.

Although Minnesota cities escaped unallotment of local government aid funds this month, the future of state funding shared with local governments appears plainly bleak. This is not likely to change in the foreseeable future. The federal government, struggling with demands including entitlement spending for an aging population, may become more engaged locally – but a sea change in funding levels is not worth betting on.

Our point is not to convey fiscal doomsday. On the contrary, we are optimistic and confident in the ability of communities to devise ways to manage diminishing state and federal funding. But we need to change the ways we manage and develop our land for this to be successful. 

This trend represents an opportunity to reconsider land use, to create more productive uses of space by reflecting the costs of our development patterns in a more transparent way. When local actors have access to better information about what various development costs, homegrown innovation will carry the day.