I appreciate the chance to come back and talk before this group. When we started out the study. We had a breakfast like this and explain what we hope to do with the study and we had a very large turnout and I'm very pleased that we have a almost as good a turn out this morning. Usually it seems in these kinds of things when you're going to study at there's a lot of hoopla and a lot of people come listen good things are going to happen. Then when the study comes out and it started getting down to the nitty-gritty it kind of Fades off into a very small a hardcore number of people who we follow through with it, and I'm pleased that so many of you saw fit to turn out this morning.And looking over the study and some material in preparation for this morning. I came across in fact the notes that I had for the talk about a year ago or whenever it was when we got there the study under way and I want to just reiterate a couple of things and in terms of background information that I found on those notes that generally relates to the role of the state government in relating to local government finance and also to a local government structure and generally the relationship between the two units of government.I guess it's my strong view that the state and local units are a partnership to design to try and provide services to citizens in a particular unit of government and that partnership is to provide that service and efficient and fair Manner and I don't think that it should be viewed as the state is the the dictator or the Boston The Firm. I view it more as kind of a managing partner.To provide this service. Now the Constitution clearly specifies that the state is that managing partner. However, and it says that the state has certain rights in setting up that partnership and the final obligation. I think rest upon the state to make sure that that partnership works. Well, all of the local units are creatures of the state. So I think the state has some obligation to look at the local units in terms of their governmental structure and kind of services are performing and certainly in the fiscal are the physical aspect has been quite often in the past Overlook. I think by the state and I'm pleased to see that that is changing now.Changing both in terms of assistance provided to the local units the other partners in this partnership and that the amount of State dollars available for running the schools for running the municipalities for helping people out with their property taxes via the circuit breaker have all increased dramatically in the last few years. So I think the dollar feed the formulas have changed quite a bit the absolute dollar amount in the percentages of State dollars to assist local unit of government have changed quite a bit. So the the role of the state and financing local government has increased substantially. However, the state's role in going to be oversight function and looking at how this money is spent and where and in what Manner has not kept pace.with the changes in the formulas and dollar amounts put out by the state and some of us were concerned a little bit about And looking at the information available and with the frustrations of not being able to achieve in part, but we wanted to achieve with the change in Aid formula was another programs we came up with this more detailed study was needed particularly of the two Central cities and that brought about the study that I think most of you are familiar with the first part of the study looks like this. It was released in August of 77. And I think the findings have been widely disseminated. I don't want to get into that now that we can later if you wish but on the little summary sheet that the Citizens League prepared two handed out it summarizes some of those finding But it seems to some of us at any rate that what we needed was a much clearer statement of the facts of the existing conditions of Minneapolis and Saint Paul and readable and understandable form. Estate planning agency given the responsibility to do this. They hired an excellent staff and I think we got what we wanted in the first phase of the study that is sort of where do we stand right now in the Central City and I think one of the questions that I was asked to comment upon was do the city is generally agree with the study. I think that they generally do and that there have been very few if any arguments as to the facts that are presented in that study. Now where we go from here. There may be some arguments about but in terms of the facts and the data presented in Phase 1 of the study, I think there has been very little argument. I think the study has shown that at least it is these two cities that we're certainly not enough New York situation. There was some talk about that a few years ago. And I think that is made clear that that isn't the case. Like I think it's made many areas that the city's have done some some very good work in the physical area, but there was some question as we went along with this about. Well, aren't you worried that this may cause the bond ratings to fall with this kind of study. my response to that was that's really kind of silly for us to why we go to sweep things under the rug because the bonding the rating houses don't understand it or or we shouldn't be doing our job and looking to see if we're really getting in fiscal trouble because the bond rating how is is might then to change the bond rating while it's my understanding that the things look pretty good to continue that Bond rating now at least for the near term Even with the study being disclosed. So I think that that was a possible adverse problem that has not developed so far and I hope does not back. I hope that because of this kind of study that did will ensure that we continue the present practice which we do now of all of the the city and the county in the state of Minnesota all having the highest Bond ratings that are possible. So I think that because of this kind of work that I hope we can look forward to a sound financial future at the local level in both Minneapolis and st. Paul. Where do we go from here? We've got this basic data that I think both Minneapolis and st. Paul generally agree with and what I called readable and understandable form and what next have there been any solutions proposed so far? There has been some discussion particularly in the area of Pensions that the state is to blame in part for some of the pension problems and that the state has got to do a better job. In a general way, I think there is some truth in that. I think the state does have to do a better job. My problem is and I confess that I don't understand pensions very well. And so don't ask me any questions about pensions, but that is an area where there has been some serious discussion between the cities and some of the state people working on this program and it says there is in the second phase of the study which will be released on or about February 1st. There will be a another section on pensions and some more much more detailed analysis of what the problem is with pensions and where that is maybe going and where it should go. That's an area where the experts in the field disagree and it's hard to get the basic agreement. Even on on data what that date of means at least and how you interpret it and I know it's been frustrating for the people who worked on the study and for some of us who are not intimately familiar with pension legislation or how it works. It's been frustrating in terms of trying to get a handle on I got a little feel for it, but there is some more work being done on pensions and I think some of those related to that work involve the state statutes are the requirements and I think you'll see more on that too as time goes along the other Solutions I guess at this stage there have not been any major proposals that I've seen from the city's coming forth about what we have to do this or from the states that we have to do that that trying to think I think a good part of this study will be that it will just results in tighter budgeting a better review process by the city's may be tougher negotiating when it comes time to negotiate for Wade settlement that kind of thing just the publicity that the study is. Giving rise to I think we'll have that effect the study on February 1st will also contain a section relating to the governmental structure of Minneapolis. And st. Paul particularly as it relates to fiscal management. That is in the mail right now and is being reviewed with the city officials. I think it a general way from what I've seen so far and I have not seen final versions or anything but it appears that there may be some problems as a result of the lack of any Central fiscal Management in the City of Minneapolis and the destroying mayor system over in St. Paul where you can there's somebody in charge a little more may lead to a little more efficient budgeting and hat but I hesitate to say too much about that because it's it's difficult to prove the causal relationships body in general. I think the fragmented system in Minneapolis and it appears you may be causing some problems, but just how great or what how great an impact that it is or what the cause a relationship is at least an information I've seen so far is not totally clear. The second phase of the study will also look at certain types of expenditures that are common to the two cities and the people involved with the study have worked out a system to try to Define certain types of expenditures that they're going to study in great detail. Try to get a little better handle on why is there the disparity between Minneapolis and st. Paul that there appears to be in several categories? Now they won't be taking every category but it's my understanding. They may very well be taking the category for example of wages or again pensions and looking at that in great depth over the last several years to try to determine why did one city go one way and the other City go the other one. What causes that? And there'll be other categories in the capital expenditures, maybe in the Area Redevelopment maybe another area that will be studied in more detail. In areas that they have not had significant increases in their budget or where the two cities have gone the same amount of increases for example snow plowing will not be one that will be studied because that has not increased phenomenally in one city or the other has not significantly gotten ahead of the inflation rate that kind of thing so that we tried to select certain areas of study that appear to maybe raise some red flags or show that there's something different going on in one city or the other that we should take a look at. The second phase of the study will do I think more in the area of detail fact-finding so we get some more facts that everybody will agree upon at least won't argue with so we got a good database and then it will analyze those facts in some depth. This part of the study will be I think a little more subjective. It isn't just a determination as to where we are today as was phase one of the study but it's a little more to get it the question of why And I think that analysis will be very interesting. The study will probably not contain a large number or any recommendations as to what to do about these problems in part because we simply don't have the time and money to do everything. We've had to pick out certain expenditures and analyze them and then if we report that again in readable and understandable form, I think the taxpayers association the Citizens League The League of Women Voters and hopefully the city council's and the Mayors and the legislature can all get in and talk about what the recommendations and how do we solve these kinds of problems? We've tried to limit it to more facts and Analysis of these facts and then I think it will the next step will be for various groups. Hopefully the legislature again in the cities involved to try to come up with recommendations as to how we solve whatever problems we say our are in existence So when the study is is completed, I think we will have a a good database that most everyone's agreed upon in some detail. I think we will have defined some problem areas again in some detail and I suspect one of these is certainly going to be the area of Pensions and possibly wages. We will have analyzed at least some of the reasons for the problem. I think we will have heightened awareness of people in the metropolitan area of state and local officials who are setting budgets and dealing with these kind of questions of the problem. I think this will lead to some changes in city and state conduct in terms of tougher budgeting negotiating. I think there may very well be some changes in some State statutes. Involving one changes in the reporting system financial matters to the state of the state auditor now collects information given to the auditor by the local units of government and puts out periodic reports. add estate planning agency in another study is looking into the whole area of local governments financial reporting to the state and there we are kind of keeping the two studies separate and yet worked looking at them together and I think they when the dust settles and all those studies get in and I think it's very likely that there will be some changes in reporting requirements for local units of government. Hopefully, they will be sensible and relatively easily implemented and have a strong support of all of the local unit of government involved that will take some doing I realize in a fair amount of time but I think that that that will come out of it is I think there may be some changes in statutes relating to local government debt limits. One of the things that this study talks about is that the state impose that limits right now are virtually meaningless because so much is Exempted and I think that's true for the last couple years. I know. On our committee, there's bills coming by for an ovum proven this Municipality of that and almost as a matter. Of course, they say they're not subject to debt limits on the last few years. We've been striking that we're not in most every Billy comes through and I think as a result of this study and the other work that more legislators are beginning to agree with that tonight. I think the whole area of that may be changed somewhat there may be some changes in May Aid formulas. Although I don't see that immediately as a result of of this study. I don't think there's any magic changes that are going to come about as a result of this but I think and a general way that it will result in much better Financial Planning and ensure that we don't have any serious financial problems down the road. One of the questions that were asked to me also here was what is the general effect on state local governmental relations and generally touched upon a time. I guess. I I think the state may monitor a little more closely the expenditures of local governments, but I don't think it will involve itself and a lot more detail as to how the money was spent. I think that is primarily the few of the local governments in the state. I think it probably in a general way. They have been doing a pretty good job of that. We have enough trouble at the state level trying to figure out how we should spend the save money on the sensible way and we don't always do the best job of that, but I think we should be well advised to concentrate on that and not to get into any great detail in any event with the local officials. So I guess I think that there may be some more a little closer monitoring this kind of thing me to study may have some effect on bills like that to change the tax increment financing laws. But I don't think that it will have Major Impact or start saying if we're going to abolish local government or the two states going to start doing telling people exactly how to spend the money. I expected the general concept of Revenue sharing between the state and local unit of government that you have now and the municipal area and the school aid formula will generally continue. Why don't you stop now and will be happy to answer any questions about the study or anything and I've touched upon today. Policymakers in the city should not really be looking to the state for any substantial Improvement in their own facial. The question was should to the policy makers in the city be looking to the state for more substantial. Improvement in their in their condition the question was it that they probably should not be I think in a general way that's true in Minneapolis. And st. Paul. I don't see significant more financial assistance for the cities right now. The study shows Minneapolis receives more money. I think it's both per capita and per household than any other municipality in the state terms of state aid. So I don't see a major amount of additional money that's going to help the financing of Minneapolis or Saint Paul coming from the state LS, correct? The question is will this study have a carry-over effect to other municipalities and or counties answer is we hope so when we started this week and maybe kind of a case study and that's something we learn in this study may be applied to other municipalities and I hope that that is the case. I think for example this area pension what we're learning here will be applied to other municipalities and at the state level which may have its effect on other municipalities was kind of interesting when the study began. some municipalities had a Erroneous view what the what the study was all about? I think they thought it was here was an attempt to Minneapolis-Saint Paul. We're going to get a lot more Estates and they wanted to be studied to just like that some great depth and I dare say now that I think that probably isn't the case that they're not lining up to come under this kind of scrutiny, but I do think that yes, it's very definitely will and we hope so and where this whole area of studying local government Finance is going to lead we don't know but I think it has been in much overlooked the area And that I think it will continue this state planning agency with this other study on local government reporting is going on. There's also some talk to buy using the raft tool to do a little more of this with all the municipalities in the state or those over or of a certain population type. Maybe not in quite the depth at the Minneapolis-Saint Paul study was but in other areas of the state, in fact some preliminary numbers indicate that up and region 1 in the state the far Northwestern corner of the state. The expenditure is are higher than they are in even Minneapolis-Saint Paul on a per-capita basis or per household base. I don't know the details. But anyways, it appears that there may be some very high spending municipalities and that's the kind of thing that we may want to continue to look at and I think that there will be an ongoing effort to do a little More looking into the financing a local governments Rod State as a result of this study. Possible on how the state might increase its monitoring of local government expenditure without actually getting into a dictating how money is spent. I think the answer to that is with a more timely and accurate reporting from the local unit of government so that instead of a two or three-year lag when the state gets the information as to how much money went for this category or that that information would be available on a yearly basis or within a year when it was spent or shortly thereafter at least and secondly. To make sure that that data is accurate right now the auditor-general he just accepts data that is given to him by the local units of government and what they do in London this apology is not the same as they do in another municipality. And so while this am heading made for the heading maybe the same into municipalities what goes under that heading is not necessarily the same and we really don't know as to what is an each heading and I think with a better reporting system that we would have a greater ability to Monitor and find that out and it would not necessarily lead to dictation by the state as you put a new question how the money should be spent. That's a difficult area. I think because I know on the School Aids formula and generally in the in the AIDS to education that I've done some work with over the years. Sometimes have a tendency at the state to when the information is there in a while. Listen, we're going to mandate this program or we're going to require this as you get into it more. I think there's a common tendency in a part of governmental units to do a little more direction as well as monitoring and that I think just takes some legislators who would win with the idea that we should not be doing that in with the general idea of Revenue sharing so that we don't get into it. I hope we don't in the municipal Finance even as much as we have in the area of Education directions how that money should be spent. We have local elected officials. They re-elected their there for a purpose and I think that they That we should generally spend a little more time trying to deal with how we spending State dollars and some other specific programs.