Budget balancing bills will be taking shape both in the House and Senate early next week.

Local legislators said they will fight to protect Local Government Aid (LGA), which Gov. Tim Pawlenty intends to shrink from $608 million to $352 million for next year in total.

Under the new formula the Pawlenty administration revealed last week, Albert Lea would receive $3.2 million less LGA from the state. That means the funding would be about half of the current level.

“That is totally unacceptable,” Rep. Dan Dorman, R-Albert Lea, said.

Dorman had pressed hard an alternative to the LGA cuts. But some GOP members sided with the governor’s proposal and have stepped away from Dorman’s.

Dorman’s plan terminates the homestead tax credit program and stops state’s reimbursement to the cities. The proposal aims not only to keep the LGA funding level but also to even out the fiscal burden between rural and suburban cities.

However, the House bill is built on Pawlenty’s plan, with additional modifications adding $38 million to it.

Dorman complained the committee did not spend enough time scrutinizing the bill. “It’s a major provision for the communities, not just in the outstate but urban, rural, everybody,” he said.

Dorman said he would still pursue the tax credit proposal in a bipartisan manner in discussions on the House floor and at subsequent conference committee meetings with the Senate.

The House bill, like the Pawlenty version, would also have a provision that allows voters of cities that have over a 2,500 population and every county to initiate a reverse referendum when the local property tax levy increases exceed the previous year’s certified levy.

Dorman, arguing that local elected officials should have the control on their taxes, said he would seek amendments to strike the reverse referendum and eliminate levy limits to help local governments make up the LGA loss.

The Senate budget bill, which is also currently in the tax committee, is still vague, but the DFL-led legislative branch is likely to come up with a more generous LGA appropriation than the House.

For the revenue side, Senate Majority Leader John Hottinger has already suggested to raise $1.15 billion by increasing taxes on high-income Minnesotans, tobacco products and some corporations.

“I am confident that it will emerge as the plan that is more fair for our local Southern Minnesota cities,” Sen. Dan Sparks, D-Austin said.

Sparks also said he would support Dorman’s effort to compensate the LGA cut with the homestead tax credit reimbursement.