Last week (when I was on vacation, "escaping" the cold and snow in Texas), Strong Towns released some information we have been evaluating internally in an attempt to get a sense of how vulnerable some of the cities here in Minnesota are to cuts in local government aid.
For those not from Minnesota, the approach may be familiar. Amongst other inter-governmental transfer payments for transportation, infrastructure, public safety and general welfare, the State of Minnesota provides many cities with funding in the form of Local Government Aid (LGA). Minnesota's budget problems have resulted in cuts in LGA and, with the state facing enormous financial deficits far into the future, it is difficult to see how the elimination of all LGA is not part of the discussion.
Fiscal conservatives may argue that government has a spending problem, that cuts in LGA are a responsible way to balance the budget by forcing local governments to be efficient with their spending. Advocates for local governments may counter that local governments are mandated to fund many different programs and, by limiting local governments to the property tax only, are given insufficient tools to raise money to pay for these mandated services.
I tend to agree with both of these arguments, but would add perhaps a different perspective. Last December I wrote a post called "Governmental Darwinism" in which I asked the question: Can we let a failing government actually fail? In reality, many local governments are very inefficient. LGA is one of the mechanisms that allow them to continue in that way. If you look at the data, you'll see that some cities are - if we are honest with ourselves - wards of the state. This can't continue.
On the other hand, the state has handed cities one development model. One way of doing business. Essentially one way to raise revenue. They have imposed an expensive transportation vision on each community that is from a 1950's handbook. One expensive way of building infrastructure. Even regulating shoreline development in the land of 10,000 lakes is done from a single, statewide template - that of a suburban housing subdivision. We have stifled all innovation at the local government level.
In a system where innovation at the state level has been gridlocked for as long as I can remember, it is not difficult to understand how we arrived in our current financial mess.
The solutions to our problems are, like the problems themselves, quite complex. They start, however with taking a close look at our towns and neighborhoods, identifying and understanding the imbalances between our finances and our system of growth and development. In every city we need a different approach - a Strong Towns approach - that maximizes the return on public investment and drives local innovation. Only then will our cities stop being vulnerable to cuts in intergovernmental subsidies, a vulnerability we all know is damaging to our future prosperity.