If you’ve heard me speak anywhere in the past month, you’ve heard me say that the process of developing the Governor’s budget proposal for FY 2010-11 has already begun. Last month, the Minnesota Department of Finance released more detailed instructions to state agencies as they develop their budget proposals.
These directions include a FY 2010-11 budget context that highlights the following:
- “We are currently spending more than we are collecting.” It is noted that the solution to budget shortfalls last year used $500 million in budget reserves, and these resources are not available this year and need to be replaced.
- “Current planning estimates show a significant gap.” Current figures show a deficit of $940 million for FY 2010-11, before accounting for any inflation.
- “Monthly revenues have exceeded expectations.” Currently, revenues are coming in higher than previous projections, but that is not expected to continue after this year.
- “The economic outlook has weakened.” As a result, the deficit could get worse when we see updated figures in the November Forecast.
- “The current law planning estimates do not include general inflation.” State agencies are directed to plan to absorb any inflationary increases. Requests for funding to address inflation will compete with other options. Agencies are directed to plan for 3% per year increases in total compensation increases for their employees.
The memo highlights the Governor’s approach for addressing the budget gap:
- Transform government to “become more consumer friendly and cost-effective.”
- Reward performance: “the state should implement performance incentives to make government more market-driven and consumer-oriented.”
- Reduce cost. “Growth in the overall size and cost of government must be reduced.”
Considering the economic context and these themes, state agencies are asked to follow three steps towards completion of the Governor’s budget.
- State agencies will assess current activities by October 6, focusing on effectiveness and results.
- State agencies will to prepare preliminary budget options for review by November 3, based on the memo developed in step one and the Governor’s themes.
- The Governor will appoint an Executive Budget Team Review that will evaluate options that best meet state priorities in early November through mid-December.
After the November Forecast comes out, tentatively on December 4, the Governor will make final budget decisions in order to release his budget to the legislature on January 27, 2009 (tentative.)