Minnesota Budget Bites

Federal Economic Recovery Act is saving jobs, keeping thousands out of poverty

December 17, 2009

Roughly 66,000 Minnesotans are living above the poverty line this year thanks to a boost from the American Recovery and Reinvestment Act of 2009, according to a recent study by the Center on Budget and Policy Priorities (CBPP). The Recovery Act not only helped struggling individuals and families, but bolstered the state’s overall economy.

It’s a win-win for residents hit hard by the recession and for our state’s economy. The Recovery Act provided Minnesotans extra food stamps, extended jobless benefits and other help. When they spend that money in local stores, that helps those stores stay in business and keeps Minnesotans working.

One of the most important decisions now facing Congress is whether to extend key Recovery Act provisions that are set to expire. With a long, slow recovery ahead, the CBPP research demonstrates why such action is important.

The CBPP’s state-by state analysis looked at the Recovery Act’s impact both lifting people out of poverty and preventing others from falling into poverty. For Minnesota, the analysis finds that the Recovery Act pushed back against the recession by keeping approximately 66,000 residents above the poverty line. That is roughly the size of the city of St. Cloud, or slightly more than Metrodome capacity for a Vikings game.

Minnesota’s economic benefits likely are much higher than the CBPP analysis predicts. It only considered seven key programs, which combined account for only one quarter of its overall spending. The seven provisions analyzed were: increased food stamp benefits, expansion of the Child Tax Credit and Earned Income Tax Credit, the new Making Work Pay tax credit, two forms of unemployment benefits (an additional $25 per week plus extended weeks of benefits) and a one-time payment to many elderly people, veterans and people with disabilities.

These are difficult times, but the study shows that the Recovery Act has kept things from being much worse. Thousands of Minnesotans are getting help making ends meet despite the worst recession in decades.

Mark Zandi, chief economist for Moody’s Economy.com, says financial assistance to hard-pressed families is one of the best ways to preserve and create jobs. In his 2008 U.S. House testimony, Zandi said a temporary increase in food stamps generates $1.73 in economic activity for every $1 spent. Extended unemployment benefits generate $1.64 for every $1 spent. These were much more effective than cutting corporate tax rates or capital gains taxes.

Congress has agreed to extend the extra unemployment benefits through mid-February. But with high unemployment expected to continue, Congress will need to extend these benefits further early next year. In addition, Congress should extend the Act’s refundable tax credits so they continue to boost the economy and help Minnesota families.

-Steve Francisco and Scott Russell

Leave a Comment » | Economy, Federal Budget | Tagged: ARRA, jobs, Poverty, recovery act, stimulus | Permalink
Posted by Scott Russell

Updates and opportunities to act on climate change

December 15, 2009

At the end of November, we blogged about how the Senate bill addressing climate change (the Clean Energy Jobs and American Power Act) fell short of delivering the funds needed for low-income consumer relief. Now we’re writing to Senators Klobuchar and Franken to share our concerns with them and we are asking your organization to add your voice.

Our new letter is an updated version of a previous sign-on letter delivered earlier this fall. Both letters reflect our ongoing commitment to:

Hold low-income households harmless from increased prices of basic necessities as a result of cap-and-trade.
Ensure equitable access to potential economic benefits, including green jobs.

If your organization was not able to sign-on to the previous version, here’s your second chance! To add your organization to the list of signers, please send an email to leah@mncn.org by this Friday, December 18th.

As you may have noticed, the Clean Energy Jobs and American Power Act is only one of several efforts underway to address climate change. Here are some other updates:

The United Nations Climate Change Conference, also called Cop15, is taking place in Copenhagen from December 7th through 18th. You can find detailed information at their Web site. If you’d like to follow a more Midwestern focus, a coalition called RE-AMP has compiled a list of blogs, twitter feeds, pictures and videos from Midwesterners in Copenhagen.
Last week Senators John Kerry (MA), Joseph Lieberman (CT) and Lindsey Graham (SC) presented a “Framework for Climate Action and Energy Independence” to inform the debate on cap-and-trade in the U.S. Senate and gain bi-partisan support. For more information you can read their five-page outline.
Last week Senator Maria Cantwell (WA) introduced a new climate change bill, the CLEAR Act. This bill proposes a “cap-and-rebate” or “cap-and-dividend” approach where 75 percent of the money raised from auctioning off carbon shares would be rebated directly to every American. The other 25 percent of revenue would be used for clean-energy research and development, energy efficiency, and green jobs assistance. For more information, a one-page summary is available.

We will continue to do our best to keep you informed as progress unfolds, but now is a great time to act by signing on to our letter or calling Minnesota’s senators with your own message. If you are interested in taking action now, please call or email us - we have templates and information you can use!

-Leah Gardner (651-757-3063) and Julia Jackson (651-757-3074)

Leave a Comment » | Action Opportunity, cap and trade | Tagged: cap and trade, climate-change, federal | Permalink
Posted by leahgardner

Legislature discusses state’s cash flow, budget deficits

December 15, 2009

The 2010 Legislative Session may begin on February 4, but the action at Minnesota’s state capitol is underway right now.

The Legislative Commission on Planning and Fiscal Policy’s subcommittee on a balanced budget (a joint venture between the House and Senate) came together on Monday morning to discuss the state’s cash flow issues and plans for solving the state’s budget deficits. These hearings are always an interesting opportunity to hear the interplay between the legislative and executive branches.

Highlights from this week:

A hot topic lately is the state’s cash flow situation. Last time they met, I blogged about the state’s potential need to do some short-term borrowing next March or April to cover cash flow problems. We still don’t really have an answer yet (Minnesota Management and Budget will be releasing a cash flow report in mid-January), but the administration is pursuing two options for covering any potential cash flow issues:

One option is for the state to seek a line of credit from a bank. This option would carry a higher interest rate, but a line of credit offers a very quick turnaround time and the state would only have to borrow what it actually needs.
A second option is to arrange a “private placement of certificates.” I believe this translates into a privately negotiated sale of bonds. This method would offer lower interest rates, but it takes a couple of weeks to set up and the state would have to commit in advance to the amount it would like to borrow.

The state is likely to begin accepting proposals for these options from interested parties sometime in January. And if you don’t understand all this loan lingo, join the club. Fortunately, we’ll get more details in early January when the executive branch will present this issue to the Legislative Advisory Commission.

The other big issue was the state’s budget deficit. The Governor is working with state agencies to develop a detailed supplemental budget. In fact, a new round of instructions will be going out to agencies this week. Legislators, however, are pushing the Governor to release his supplemental budget this month (yes, before the end of December). House and Senate finance committees plan to start meeting in January to get a head start on solving the state’s budget problems. They want the Governor’s proposal in hand to help inform that process. Commissioner Tom Hanson made no promises, but said they are aware of the legislature’s fast timeline and will present the budget as soon as they can. In a letter to legislative leaders earlier this month, the Governor indicated that he plans to solve the $1.2 billion deficit for the FY 2010-11 biennium “without raising taxes” and wants to protect funding for “veterans, military, and core public safety activities.”

The subcommittee will meet again on January 13th to hear some ideas for how to solve the state’s financial troubles.

Hang on folks, the next few months are going to be a bumpy ride.

-Christina Wessel

Leave a Comment » | Budget Process | Tagged: balanced budget, cash flow | Permalink
Posted by Christina Wessel

Senate committee to review Governor’s proposed constitutional amendment

December 7, 2009

The Senate Tax Committee is holding a hearing today about the recent November Forecast and the Governor’s proposed constitutional amendment to limit spending.

This Spending Limit Amendment is an extreme and inflexible tool that takes decision-making power out of the hands of the people and their representatives. I’m planning to testify, and here’s the gist of what I’ll be saying.

This constitutional amendment will create long-term harm to services needed by businesses, communities and families. Public investments in education, health care, workforce development, transportation and services for seniors and people with disabilities help build our state’s infrastructure and quality of life. Under this amendment, the legislature and governor will be powerless to maintain adequate funding for these services and invest in the future needs of our state. As a result, this amendment will make it harder to give businesses the tools they need to prosper, and limit opportunities for our families and workers.

This constitutional amendment tears down the foundations of our representative democracy. Minnesota has a proud tradition of strong civic engagement. Our elected representatives must constantly weigh public expectations for things such as a quality educational system, uncongested roads and safe and healthy communities, against concerns about the level of taxation. This amendment would hand this essential decision over to a formula instead of permitting a meaningful public debate to decide the appropriate balance.

This constitutional amendment undermines accountability. A representative system of government delegates authority to make the tough decisions, so they are clearly accountable for budget decisions. Under this constitutional amendment, lines of accountability are stripped away. The constitutional amendment forfeits the authority to determine the size of the budget to a formula, making it difficult to identify who should be held responsible for the outcomes of budget decisions.

This constitutional amendment is unnecessary. Governor Pawlenty has described his success in slowing government spending to just over 2 percent a year and cutting spending for the first time in the state’s history. That demonstrates that this amendment is not necessary: the Governor has achieved his desired outcome without this amendment. It is not appropriate, however, to require all future governors and legislatures to achieve a similar result, regardless of what the desires of the public or the state’s needs may be.

Similar proposals have been defeated throughout the country. Since 2004, there have been serious efforts to enact strict spending and revenue limits based on rigid, arbitrary formulas in 25 states — and they have failed every time. These measures are modeled after Colorado’s so-called “Taxpayer Bill of Rights,” or TABOR. Colorado, the only state ever to adopt TABOR, suffered a serious deterioration in education, health care, and other services due to its rigid spending limits. That’s why a broad coalition of residents — including business leaders — came together to suspend it in 2005.

As Minnesota emerges from the current economic crisis, it will need the flexibility to make much-needed investments in education, health care, roads and bridges, and other areas. If adopted, the TABOR-like limits in the proposed constitutional amendment would prevent our state from making those investments, and leave it without the skilled workforce and solid infrastructure needed to prosper. The bottom line is that it’s never a good time to adopt rigid, arbitrary limits on our budget.

-Nan Madden

Leave a Comment » | Budget Process, Budget Proposals | Tagged: constitutional amendment, TABOR | Permalink
Posted by Nan Madden

CBO: Up to 1.6 million jobs created or preserved by stimulus

December 4, 2009

As bad as it is, the current recession would have been worse without the stimulus package, according to a recent report by the nonpartisan U.S. Congressional Budget Office (CBO).

The American Recovery and Reinvestment Act created or preserved between 600,000 and 1.6 million jobs so far, the report said. It also has increased economic activity, as measured by the Gross Domestic Product, by between 1.2 and 3.2 percent. It lowered unemployment by between 0.3 and 0.9 percentage points.

These November estimates represent a slight improvement from CBO’s March projections. (They are consistent with private sector economists. Mark Zandi, chief economist and co-founder of Moody’s Economy.com, estimated the country would have approximately 1 million fewer jobs without the stimulus. See here, page 5.)

The Center on Budget and Policy Priorities released a summary of the CBO report. It said the most effective provisions for saving and creating jobs were direct purchases of goods and services by the federal government, aid to states (such as picking up a larger share of Medicaid costs), and transfer payments to individuals (such as increased food stamp support or extended unemployment eligibility).

“CBO’s estimates indicate that tax cuts are less effective job producers, and tax cuts for higher-income people and corporations have very low bang for the buck,” the Center on Budget and Policy Priorities reported.

-Scott Russell

Leave a Comment » | Economy, Federal Budget | Tagged: ARRA, CBO, jobs, stimulus | Permalink
Posted by Scott Russell

November Forecast: $1.2 billion deficit now, $5.4 billion deficit later

December 2, 2009

$1.2 billion. That’s the new deficit that has opened up for the current biennium (FY 2010-11), according to the state’s just-released November Forecast. About 70 percent of this deficit is due to lower than expected income tax receipts. Remember, policymakers already took action earlier this year to resolve a $6.4 billion deficit for FY 2010-11. This $1.2 billion is a new deficit that must be addressed before the biennium ends on June 30, 2011.

The legislature will need to be ready to act fairly quickly when they convene in early February - we are already about half-way through the first year of the biennium, Fiscal Year 2010 (which ends June 30, 2010). As of today, Commissioner of Minnesota Management and Budget Tom Hanson reports that we’ve spent 22 percent of the FY 2010-11 budget. That means the $1.2 billion deficit works out to about five percent of our remaining general fund spending for the biennium.

Of course, many wonder whether the Governor will take unilateral action to solve some or all of the deficit through unallotment. Although time may be short, unallotment is undesirable because it would preempt any public discussion of how this deficit should be addressed and precludes public participation in the process. Also, unallotment narrows the choices for resolving the deficit – raising revenues would be off the table. During the press conference, Commissioner Hanson deferred questions about unallotment to the Governor. However, he did mention that there is about $400 million in aid payments going out to city and county governments before the end of December.

$5.4 billion. That’s the updated deficit projection for the next biennium (FY 2012-13) – about 14 percent of that biennium’s general fund budget. That deficit figure does include repaying the K-12 aid deferral (at a cost of $1.167 billion). It does not include repaying the K-12 property tax recognition shift – the second piece of the K-12 education shift done through unallotment ($562 million), covering the costs of inflation ($1.179 billion), or fully restoring General Assistance Medical Care ($928 million).

What should we do? (also check out our press release)

We need to find long-term solutions to long-term problems. The new $1.2 billion deficit is not just due to poorer than expected income tax collections – it’s also because we didn’t implement more long-term solutions earlier in the game. Policymakers have been relying heavily on one-time resources, budget gimmicks and unallotment to solve recent deficits. The overuse of those tools has just kicked the can down the road. Now we are really seeing the implications of that strategy.
We need to raise revenues to help us resolve the current deficit – and future deficits. We can’t solve the whole problem by raising revenues, but it is unsustainable to continue to address budget deficits almost entirely by relying on one-time resources, spending cuts and budget gimmicks. Not only are those decisions hurting Minnesotans who need help the most during the current economic downturn, but they are also reducing the investments Minnesota needs to position our state to take advantage of an economic upswing. We wouldn’t be alone in raising taxes. Nationwide, 35 other states are currently facing budget deficits. And during the last year, at least 30 states have enacted tax increases to help close budget holes. It’s our turn.

There was a little good news. State economist Tom Stinson did assure us that, “we are clearly on the long, slow path upward.” The economy as a whole is actually tracking pretty close to previous expectations. The problem is jobs and wages. Back in February, we were projecting a loss of 120,000 jobs in Minnesota. That number has been revised to 154,000 (131,000 jobs have already been lost). Nationally, total wages were expected to shrink by 0.4 percent in 2009. That number has now been revised dramatically up to 4.5 percent nationally. In Minnesota, we are estimating a 5.5 percent decline in total wages. Commissioner Hanson warns us that although the recovery has begun, it will be “long, slow and bumpy.”

This is just our first look at this news. In the coming weeks, there will be additional legislative hearings that will get into more of the details. We’ll be there, and we’ll be sure to blog on what we learn.

-Christina Wessel

3 Comments | Budget Process | Tagged: budget deficit, november forecast | Permalink
Posted by Christina Wessel

Senate climate bill falls short on funds for consumer relief

November 30, 2009

In early November, the Senate climate change bill (the Clean Energy Jobs and American Power Act) made its way through the Senate Environment and Public Works Committee. Here at the Minnesota Budget Project, we asked Minnesotans to contact our own Senator Amy Klobuchar, who sits on this committee, to ask her to maintain and strengthen the low-income consumer relief provisions related to the cap and trade system. Unfortunately, there was a setback in terms of fully funding consumer relief, and we want to update you on what changes were made and where the bill is headed next.

While the House bill provided full relief for low-income consumers, committing 15 percent of the total emissions allowance value, the Senate version has decreased the overall amount of funds due to deficit reduction requirements. Although the bill still says it provides 15 percent for consumer relief, it is 15 percent of a smaller pot of money. In comparison to the House bill, the Senate bill actually ends up allotting 12.6 percent of the previous total allowance value according to the Center on Budget and Policy Priorities. For more information on the Senate climate bill you can read their full report on the latest markups.

Although the Senate may not be looking at the Clean Energy Jobs and American Power Act again until early 2010, now is the time to get involved.

The Minnesota Budget Project is hosting two events this week to bring people together to talk about why climate change is a concern for low-income communities and how proposed solutions can create new opportunities. These Convening on Climate Change events are free and will take place in Duluth on December 2nd, and Mankato on December 3rd. You can find the details and RSVP for these events online.

Now is also a great time to contact your Senators or plan a visit for when they are home for the holiday break. We suggest the following simple talking points:

Provide full protection to low-income households and extend additional relief to moderate income households by increasing the allowance revenue dedicated to direct consumer relief. At a minimum, dedicate the same amount of revenue as the House bill did—using 15 percent of total allowance revenue.
Redirect allowances currently going to utilities, as needed, to fund direct consumer relief.
Provide additional funds for the Low-Income Home Energy Assistance Program (LIHEAP) to provide energy assistance to low-income consumers who face above-average cost burdens, risking utility shut-offs or other hardships.

Another reason to act now is because we expect discussion to heat up with the upcoming COP15 international conference on climate change taking place in Copenhagen in December. Find out more online at the COP15 website.

-Leah Gardner (with Julia Jackson, our intern working on climate change)

Leave a Comment » | Action Opportunity, cap and trade | Tagged: climate-change, Congress, consumer relief, low-income | Permalink
Posted by leahgardner

Give to the Max Day was a success – thank you!

November 24, 2009

The Minnesota Budget Project was one of over 3,000 nonprofit organizations and projects who participated in GiveMN.org’s Give to the Max Day on November 17.

Thanks to everyone who made this day a success – the Minnesota Budget Project raised over $2,000 on Give to the Max Day.

This success is a great start to our year-end fundraising efforts. But we have not yet crossed the finish line. There are crucial decisions ahead in 2010, and your strong financial support will help the Minnesota Budget Project to fight hard and smart for state and federal policies that raise revenues fairly, protect low- and moderate-income Minnesotans and rebuild our public institutions.

- Nan Madden

Leave a Comment » | Action Opportunity | Permalink
Posted by Nan Madden

A first look at the Senate health care reform bill

November 20, 2009

Senate Majority Leader Harry Reid has unveiled the long-awaited health care reform bill that he hopes to bring to the Senate floor for debate. The Patient Protection and Affordable Care Act would reduce the number of uninsured Americans by 31 million at a cost of $849 billion over ten years, according to the nonpartisan Congressional Budget Office (CBO). Furthermore, CBO estimates that the bill would reduce the federal budget deficit by $130 billion over the next ten years.

So how does the Senate bill measure up against the Minnesota Council of Nonprofits’ health care principles, and what are some of the major differences from the House bill?

1. Support for small employers, including nonprofit employers. Unlike the House bill, the Senate bill does not include a mandate requiring employers to offer health insurance coverage to employees. However, medium and large employers would pay a fee if the federal government provides subsidies so that their employees can purchase coverage. Tax credits of up to 50 percent of premiums would be available to small businesses and small nonprofits to make coverage more affordable.

2. Make health care affordable for low-income Minnesotans. The bill mandates that nearly all individuals obtain health care coverage, but includes an exemption for economic hardship. The bill includes premium tax credits and cost-sharing assistance to help households with incomes between 133 percent and 400 percent of the federal poverty line (up to $88,000 for a family of four) to afford health insurance.

Medicaid, the joint federal-state health care program for low-income people, would be simplified and expanded in 2014 to cover Americans under age 65 with incomes below 133 percent of the federal poverty level. This is a smaller expansion than in the House bill, which would cover people with incomes up to 150 percent of the federal poverty level.

3. Provide adequate federal funding. The Senate bill has different funding sources than the House bill, such as a new fee on insurance companies when they sell high-cost health insurance plans and a 0.5 percent increase in the Medicare payroll tax for individuals who earn more than $200,000 and couples who earn more than $250,000.

The federal government would pay 100 percent of the cost for people who would now qualify for Medicaid under the proposed expansions through 2016, and in future years would cover an average of 90 percent of the cost. This is a critical step for ensuring that the federal government does not shift too much of the cost of health care reform to the states.

4. Contain unsustainable cost increases. The bill creates health insurance exchanges to help make coverage more affordable and accessible. The bill also includes a public health insurance option, but with a provision permitting states to opt out.

The Senate bill also includes numerous insurance reforms, including prohibiting insurers from discriminating based on pre-existing conditions, imposing lifetime limits on benefits, rescinding coverage except for fraud, and establishing eligibility rules that discriminate in favor of higher-wage employees.

Majority Leader Reid hopes to bring the bill to the Senate floor in the near future, with debate expected to proceed for approximately two to three weeks. Reid will need to garner 60 votes again to cut off debate (cloture) and proceed to a final vote. If the Senate passes its bill, conferees will be appointed to work out the differences between the House and Senate bills before a final vote on a conference report.

Stay tuned for further details in the continuing health care reform debate.

-Steve Francisco

Leave a Comment » | Health Care | Tagged: federal, Federal Budget, Health Care, health care reform, medicaid | Permalink
Posted by Steve Francisco

Support Minnesota Budget Bites on Give to the Max Day

November 17, 2009

This may be the first time you’ve heard about “Give to the Max” day on Tuesday, but more likely it’s the fortieth time. Bottom line, Tuesday is a great day to donate to the nonprofits you love, including the Minnesota Budget Project. For a 24-hour period from 8:00 a.m. on November 17, 2009 until 8:00 a.m. on November 18, 2009, every donation made through GiveMN.org will receive a match. The exact amount of the match will depend on total donations received during Give to the Max day.

Please consider making a donation to the Minnesota Budget Project to support the work of our blog. You’ll ensure that we are able to keep providing you with timely information on the hottest state and federal budget issues. But we aren’t just busy blogging during the legislative session – over the summer and fall, we’ve been following the federal health care debate, budget hearings at the Capitol and a whole range of other issues. If you find value in the work we do, we hope you’ll show your support by making a donation. Tuesday is a great day to donate – but any day and any amount will make a difference for us!