Cities need to break addiction to local government aid

I was once stuck on a flight next to a dysfunctional couple, who spent two hours arguing about which one of them was more codependent. As a confirmed skeptic of all things psychobabble, I had little idea what they were talking about at the time.

Now I get it.

In fact, I think I'm going to submit an update to the Wikipedia entry on codependency. It shouldn't be limited to couples and families. There needs to be a subclassification to cover the relationship between Minnesota's state and local governments.

Classic symptoms of codependency include controlling behavior, boundary distortions, mutual mistrust and excessive oversight, accompanied by frustration over an inability to improve the situation. The most recent failure of the governor and Legislature to reach a compromise on the state's budget confirms the diagnosis, so it's time to focus on treatment.

First, a bit of context. The state doesn't actually do much of anything in our highly paternal system of governance. That sounds harsh, but with the exception of a few nursing homes, environmental and highway services, the state mostly just collects taxes and distributes the funds to those of us responsible for actually providing public services. (I am Minnetonka's city manager.)

Of course, it also attaches strings to those funds. Some state officials like to talk about local responsibility for property taxes, but the truth is, they're not willing to allow local leaders very much discretion. On top of mandating that we provide certain services, they restrict our ability to raise the revenue to pay for those mandates.

For our part, we like to complain about unfunded mandates, but are hard-pressed to turn our backs on all that state money. As Gov. Arne Carlson used to say, "It's a whole lot easier to spend someone else's money."

There's a downside, of course. When the state mismanages its financial affairs, it cuts our allowances, and publicly scolds us about financial responsibility.

It's not a healthy relationship. State officials think we act like ungrateful whelps, and local leaders feel like adult children whose controlling parents keep us dependent to satisfy their own needs. Rather than cultivate independence and accountability, the system continues to foster codependency.

We need to break that cycle. Not only because it makes good policy sense, but out of fiscal necessity. Hidden amid all the political bluster accompanying the governor's recent unallotments is a hard truth that portends a sobering future for local governments.

More than 80 percent of the state's "solution" to the latest budget crisis consisted of one-time windfalls and accounting shifts. That means the unallotments fixed nothing, and the problem was simply shifted forward. The state's next budget will still be $6.5 billion in the hole, if we're honest about inflation, with few remaining options to realistically deal with it. To all the commentators who are now saying, "It could have been worse," rest assured: It will be.

It's increasingly obvious that local governments can no longer depend on the state of Minnesota to be a reliable partner. Even if our state leaders were committed to restoring a more functional partnership, the state budget is so far underwater there's little capacity to do so -- not only for the next budget, but for years to come.

The city I serve manages for the long term to ensure our future capacity to provide quality services at a reasonable price for our residents and businesses. We're hardly unique among local governments. Cities and counties throughout the state are now making difficult decisions about staffing and service levels to absorb the disproportionate state cuts.

Here's a little-known fact: local aid accounts for about 10 percent of the state budget, but we had to absorb about 40 percent of the governor's $700 million in actual cuts. The rest of the $2.7 billion in unallotments consisted of one-time smoke and mirrors.

Local leaders can manage through the economic challenges of recessionary cycles, but we cannot continue to allow the communities we serve to suffer the ongoing vagaries of failed state leadership. It's not just about the latest round of cuts, it's the uncertainty from year to year that makes it so difficult to responsibly plan and manage the public services we provide.

Faced with a system that chronically allows short-term political expediency to trump sound public policy, we can either continue to bay at the moon or take steps to break that cycle of codependency. Realizing that the state is nowhere near to seriously addressing its permanent budget imbalance, some of us are acting now to reduce our future dependence on such an unreliable partner.

More and more cities are adopting long-range strategies to systematically wean ourselves from the free money by treating an increasing portion of it as a windfall, and not building all of it into our base operating budgets. Whatever check comes from the state, we'll use part of it for one-time capital projects such as a new park. We'll no longer depend on all of it to pay for the salaries of our police officers.

We can hope that our state leaders will someday be willing to move past the denial stage and tackle the meaningful service reforms and fiscal discipline that our state so desperately needs. But until that someday comes, many of us local officials have decided we can no longer afford to wait. Codependent no more.

John Gunyou, city manager of Minnetonka, was state finance commissioner under former Minnesota Gov. Arne Carlson.

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