and the Associated Press

Austin City Administrator Jim Hurm is taking a cautious approach to the news that a proposal by Gov. Tim Pawlenty could slash Local Government Aid much more than the city anticipated.

Austin currently receives $7.8 million in LGA payments from the state. However, city officials said they were expecting that as a "worse-case scenario," $1.8 million would be cut from that amount.

But with Pawlenty's new proposal, Austin would receive $3.5 million less in LGA -- nearly double the amount city officials were expecting.

"What can you say? I thought $1.8 million was bad enough. We were planning a worse-case scenario," Hurm said.

The city has already started to trim some services, hold off on hiring some employees and offered early retirement to others as part of the $1.8 million anticipated savings.

But if Pawlenty's proposal is pushed through, Hurm said city officials will have to look at new solutions that aren't attractive.

"Honestly, it is devastating," Hurm said of Pawlenty's proposal. "We'll have to look at the whole thing. If the governor's proposal goes through, it will be devastating."

The mandate to Pawlenty's top moneymen was simple: Strip the politics out of the formula that determines which cities get government aid, and see who would get the help if it were driven simply by their needs and their ability to raise money on their own.

The result is sure to be questioned by those who come up losers. But broadly, under the new formula cities in greater Minnesota would get a bigger slice of aid, the Twin Cities would stay about the same and plenty of suburbs, both rich and poor, would lose money.

"This is a good, clean nonpolitical formula," said Revenue Commissioner Dan Salomone, who revealed the plan in a news conference Wednesday.

In the end, it may be largely an intellectual exercise, since all cities are likely to lose at least some aid under Pawlenty's budget plan.

Local government aid, or LGA, is predicted to be $608 million in 2004 under current law, but Pawlenty has proposed cutting that to $352 million as part of his plan to eliminate a $4.2 billion deficit.

Democrats said on Wednesday that people should focus more on Pawlenty's proposed cuts than on how the remaining money will be distributed.

"We need a solution to the cuts, not just to the formula," said Sen. Ann Rest, DFL-New Hope. "We really do need to not be distracted by a formula that is a drastic change."

The stakes are high. City officials have been vocal and powerful opponents to Pawlenty's budget at the Capitol, arguing that he plans on keeping his own no-tax pledge by forcing cities to raise property taxes.

Essentially, the proposed formula rejects 1993 legislative action that enacted a funding formula that was also supposed to be based on need, but only applied to new money.

Then, all cities were guaranteed at least as much money as they had gotten under historical funding levels. The new plan is meant to be based entirely on need and ability to pay.

LGA is one specific program among a handful that redistribute money from the state to cities.

It was designed in 1971 to help cities with lower tax bases continue to provide basic services without raising taxes significantly. Most cities receive some amount, though a handful of wealthy suburbs get nothing.

Assuming Pawlenty didn't make his aid cuts, his new formula would cost Minneapolis only $2 million of the $123 million a year it now gets.

Smaller rural cities such as Ely get more -- $1.8 million versus $1.65 million under current law, but many of the larger population centers such as Austin, Rochester, Mankato and Moorhead would lose money.

On the whole, suburbs lose money under the plan. Coon Rapids, for example would go from $2.8 million to nothing, Hopkins would move from $1.3 million to zero and Eden Prairie would lose all of its $172,000.

Gary Carlson, director of intergovernmental relations for the League of Minnesota Cities, said at first glance he couldn't determine a political bent behind the formula.

Republicans traditionally do best in the suburbs, and worst in the Twin Cities proper.

"It doesn't appear to be purposely slanted," he said. He called the formula "a good starting point," but questioned whether any rewrite of a formula -- traditionally one of the touchiest points of division the Legislature -- can be agreed upon in the less than three weeks left before the session ends May 19.