Albert Lea would have to make immediate budget cuts to offset reductions in local-government aid if Gov. Tim Pawlenty’s proposal becomes law, and leaders are concerned the city may be unfairly penalized because of unique accounting practices that make the city appear richer than it is.

The impact of Pawlenty’s local-government aid (LGA) cut proposals came into clearer focus Thursday night when City Manager Paul Sparks presented the city council with numbers calculated by the League of Minnesota Cities, an out-state city lobbying group, through a formula given by the state.

The numbers say that Albert Lea would have a $748,684 cut in 2003 LGA. In 2004 the cut would be $2,627,505, or 12 percent of the city’s budget. Overall, Pawlenty called for a 22 percent cut to overall LGA funding.

These numbers, though preliminary and unofficial, were nonetheless shocking to city officials.

&uot;The governor’s proposed cuts for the city of Albert Lea are very significant,&uot; Sparks said. &uot;We need to address how we are going to deal with these cuts now.&uot;

The numbers, Sparks says, are based upon the revenue for the city in the past few years. Two significant causes make Albert Lea look as if they have had extremely high revenue, which isn’t correct, according to Sparks.

The first is the $10 million of state refunds from police and fire pension fund overpayments, which the city received more than three years ago. The money is supposed to be used only for police and fire purposes.

The second is the way in which Albert Lea gets money for most projects. Instead of borrowing money for every project, like most other cities do, Albert Lea has a revolving loan fund. This means that when the city pays back loans, it looks in an audit as if it is paying itself, or making revenue. In other cities, through a more straightforward borrowing method, it appears, in audits, that they are paying off debt instead of collecting revenue.

Sparks said he expects the $748,684 in cuts forecast for 2003 is probably near what the reality will be. But the problem is with the &uot;aberrant&uot; numbers for 2004. Sparks says the cut should be around $1 million less than the $2,627,505 estimate, due to the pension fund and revolving loan factors.

Rep. Dan Dorman, R-Albert Lea, said he thinks those numbers will be corrected soon, and shouldn’t be scrutinized in too much detail.

Dorman said he spoke with many people at the governor’s office about the numbers. The response was that they understood the formula had to be fixed for situations like Albert Lea’s.

&uot;We’ll get that $10 million (pension fund) out of there,&uot; he said. &uot;That will probably make things a little better.&uot;

But there is little doubt that the cuts will hurt.

&uot;We are still looking at a sizable reduction,&uot; he said.

He hopes that some of the cuts can be lessened &uot;This is just an opening proposal. I think we’ll massage the formula again.&uot;

Dorman said he expects the House and Senate to come up with their own plans soon. He added that a proposal won’t be finalized until late spring.

&uot;We still have a long way until May,&uot; he said.