Resolution #2011-2 Full Funding of Entitlement Program

In 2001, the Legislature, with the support of cities, towns, counties and consolidated governments, enacted House Bill 124.  The so called “Big Bill” was intended to stabilize and simplify state revenue transfers between the state and local governments, and to connect future distributions to the performance of the state’s economy.  Since the law was enacted, entitlement payments have increased each year through up and down economic cycles in accordance with the formula that tracks per capita income and gross state product.  Now, with the state facing a possible $400-million budget deficit, the Legislative fiscal staff has recommended freezing entitlement payments at current levels.  There are many arguments cities can offer to counter this proposal:  

1. State collection of municipal tax revenues relinquished under HB-124 exceed distributions back to cities and towns by at least $20-million since the law was passed in 2001.
2. The bill also simplified state revenue administration and reduced costs.
3. In 2007, when the state was sitting on a $1-billion budget cushion, local governments did not propose adjusting the growth formula to increase allocations.
4. This program is based on an agreement between the state and local governments.  It may not be a legal contract but it is an ethical obligation.
5. The formula is based on four years of economic performance, and because good times will be replaced by recession years, the cost of keeping the promise may be less than $6-million over the next two years.
6. Freezing entitlement payments will force cities to cut public safety and other services and could lead to higher mill levies.

Be it resolved that the League of Cities and Towns will oppose any measure that will reduce, delay, or otherwise interfere with the allocation of entitlement payments under the formula agreed to by the state and local governments in 2001.