Senate taxes committee restores sparsity adjustment for local government aid; amendment adopted

Senate Taxes Committee members adopted an amendment and heard testimony on Senate File 128, a bill that reinstates a sparsity adjustment to the local government aid formula and raises the 2026 LGA appropriation so no city loses funding.

The bill “modifies the calculation of city aid” and “reincorporates the sparsity adjustment,” Senator Farnsworth told the committee, adding that the change targets cities with low population density and that the amendment increased the LGA total by $25,500 to avoid reducing other cities’ aid. Ms. Johnson, the committee fiscal analyst, said the amendment’s increased appropriation holds cities harmless: “if you look through the cities, no cities have a decreased amount,” she said.

Why it matters: advocates said the sparsity adjustment targets cities that have large land areas but small tax bases, making routine maintenance and services more expensive per resident. Mayor Peter Hajduk of Hibbing described the city’s situation in detail: “Our city land mass within our city borders is so large that all of Ramsey County, the city of Saint Paul, and all our suburbs can fit inside the City Hibbing footprint,” he said. He noted Hibbing’s population is “approximately 16,000 residents” spread over “186.5 square miles” for a population density of “85.7 residents per square mile.”

Fiscal and distribution details: Senator Farnsworth said the sparsity adjustment applies to cities with average population density below defined thresholds and that “this will affect, either 10 or 12 cities in the state.” Ms. Johnson explained why Hibbing receives a larger share of the $25,500: the sparsity adjustment is added into per‑capita revenue need and then multiplied by population, so higher‑population qualifying cities receive proportionally more. Committee materials list the cities that would receive increases (including Hibbing, Rushford Village, Babbitt, Donaldson, Big Falls, Effie and others), and show Hibbing would receive roughly $13,000 of the added appropriation.

Action and procedural status: Senator Klein moved adoption of the A2 amendment; the committee recorded an aye vote and the amendment was adopted. Senate File 128, as amended, was laid over for consideration in the omnibus taxes bill.

The committee did not vote on final passage; members said the bill will be considered as part of the omnibus package.

Committee context: senators and staff framed the proposal as a modest, targeted correction to the 2023 LGA formula that removed the sparsity component. Testimony emphasized local infrastructure and public‑safety needs in qualifying communities and the limited scale of the appropriation.