New Ulm's budget hit by cuts in state aid

By RON LARSEN

Journal Staff Writer

NEW ULM--The City of New Ulm is going to have to learn to live with less in the coming years or find some way to replace the state dollars that won't be coming anymore.

That is the view of City Manager Brian Gramentz in reviewing what appear to be the final figures on the local government aid cuts made by the 2003 Minnesota Legislature.

If it hadn't been for the cuts required in order to balance the state's budget, the city would have received $4,296,407 in local government aid this year.

Instead, the city will receive only $3,683,397 this year and even less in 2004 when it's scheduled to receive $3,405,856. But that's not the end of it.

If there are no changes made by next year's Legislature, the city can look forward to another drop of $49,480 in LGA in 2005, according to projections released by the non-partisan House Research Department this week. That means the city would receive $3,356,599 annually in LGA starting in 2005.

That's because the formula used in distributing the aid to cities and counties was changed in the legislation mandating the cuts.

However, City Manager Brian Gramentz says the cuts themselves aren't the only concern.

"We've got to make up the difference that we didn't cut in 2003, but then also deal with the cuts in 2004 and then deal with any inflationary adjustments that have to be made in purchasing supplies," Gramentz explained.

"We're not going to get any more revenue, but our expenses are going to go up so we're going to have to cut our expenses in some way, fashion or form to adjust for inflation. So, with that in mind, we've got an anticipated job ahead of us."

Gramentz said the city would be starting probably in August to start formulating the budgets for 2004.

With the actual cut in LGA for 2003 amounting to $613,010, the city's self-imposed budget-cutting amounting to just under $500,000 leaves about $113,000 to add to next year's LGA cut of $277,541. So, that means the city will have to find another $390,551 in cuts next year to live within its budget.

Preliminary estimates are that increases brought about by inflation will total $300,000 so that means the city will actually be looking at almost $700,000 in cuts, Gramentz said.

The city does get a little help from the legislation reducing LGA payments. The law allows local governments to take a one-time "levy back" to cover 60 percent of the lost LGA in 2003 through a 14.5 percent increase in the mill rate for 2004. For New Ulm, it means the city could levy an additional nine mills on top of the five-mill annual increase it is allowed.

Will New Ulm take that opportunity to recoup some of the cuts?

"I've heard and read that counties, schools and cities are all looking at that as an option, and I'd have to say it's an option that we're going to have to look at and see if it makes any sense when we actually do the budget," Gramentz said.