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With the state facing a $4.56 billion budget deficit, aid to cities like Paynesville could be cut in 2003.

The city council approved a $1,374,200 budget last week. The 2003 budget is 1.8 percent lower than last year's budget of $1,399,500, a planned reduction in spending of $25,300.

The largest portion of the city budget - over $568,100 or 41 percent of the budget - comes from the state in the form of Local Government Aid. In 2003, because of the state's huge budget deficit, LGA contributions are at risk, and city officials don't know how much their aid will be reduced.

The city's certified tax levy for 2003 is $437,300, almost $7,000 or 1.6 percent higher than the 2002 levy. (The levy is still $35,000 less than 2001.) In 2003, the tax levy should provide the city with nearly 32 percent of its revenue.

Originally, the city levy proposal for 2003 was $483,200 (in order to account for lost aid in 2002) but this was later reduced. According to city administrator Steve Helget, if a tax increase is necessary, the city tries to only raise taxes in relationship to the increase in area property values. He added that city officials don't want to burden residents with large tax increases.

Without a larger tax increase, the city is going to have to find other ways of making up any loss in state aid, primarily by reducing spending. According to Helget, the city is looking at a few different ways to offset the possible loss of state funding, including using money from capital improvement funds, but it's very difficult to plan for cuts, he said, without knowing how deep the cuts may be.

If it becomes necessary, Helget said, some projects or purchases planned for the next few years may be cancelled or delayed.

"To a legislature that has promised not to raise taxes, cutting LGA has to be attractive," Helget told the city council on Thursday.

LGA payments are split into two payments per year: in July and in December. The city was concerned about the possible loss or reduction of its second LGA payment for 2002, amounting to $280,000. Fortunately for the city, Governor Jesse Ventura chose to go ahead with the payment. The city received this payment last week.

For 2003, the city was able to reduce some spending because the city made some purchases and did some projects in 2002 that don't need to be repeated, such as the purchase of a new copier ($13,000) and seal coating some streets ($20,000). The city will also save money because it will not have to pay legal fees to negotiate the cable television franchise, a savings of $8,000, and because it is no longer paying for debt service for the Koronis Civic Arena, a savings of $7,000.

These four items account for a $48,000 reduction in spending.

The city did raise budget spending in a few areas. Public safety saw the largest increase in the budget. Combined, the fire department and the police department should receive $423,850, or $21,300 more than last year to replace equipment, such as self-contained breathing apparatus for the fire department, and pay higher salaries and benefits.

Other city departments also saw increases for higher wages and benefits due to step increases and cost-of-living increases, said Helget.

The city budget for 2003 and the city tax levy for 2003 were approved by the city council at their meeting on Thursday, Dec. 26.