The Governor’s supplemental budget proposal cuts $49.7 million from economic development spending, including reductions in job training programs and affordable housing initiatives. The bulk of the savings come from one-time measures, which help fix the FY 2010-11 deficit but do nothing to solve the state’s long-term budget problems. The major pieces of the economic development proposal include:
- $30 million in a one-time transfer from the Douglas J. Johnson Economic Protection Fund (funded by a taconite tax that mining companies pay instead of property tax).
- $9.3 million cut from the Department of Employment and Economic Development (DEED)
- $4.7 million cut to the Minnesota Housing Finance Agency
- $5.7 million in other cuts, such as phasing out State Arts Board support, eliminating funding for the Minnesota Humanities Commission, and cuts to tourism (Explore Minnesota), the Minnesota Historical Society and various boards.
Worker training and support reduced. In a tough economy, the Governor’s proposal cuts programs that help train workers, including services that support some of society’s most vulnerable adults. Budget reductions include:
- $238,000 cut to State Services for the Blind which helps Minnesotans who are blind, visually impaired or Deafblind with their employment skills,
- $1 million cut to the extended employment program which helps people with significant disabilities keep and advance in their jobs,
- $320,000 cut to the Independent Living Program which teaches skills and provides services that enables individuals with disabilities to live independently, and
- $290,000 cut to the Job Skills Partnership, which funds job training or retraining partnerships between educational institutions and businesses.
Less money to maintain affordable rental housing. The Governor proposes reducing Minnesota Housing Finance Agency (MHFA) funding by 6 percent. The largest cut ($3.7 million) is funding that helps preserve affordable rental housing. The Governor’s proposal also cuts $1 million from MHFA’s rehabilitation loan program, which finances improvements to smaller rental properties occupied by low-income renters.
Heavy reliance on one-time savings. The Governor’s budget proposal for economic development includes nearly $36 million in one-time transfers or cuts, or more than 70 percent of the total savings in this area of the budget. In addition to the $30 million transfer from the Douglas J. Johnson fund mentioned earlier, the Governor’s proposal also transfers $5 million from the 21st Century Minerals Fund. Both of these funds were created to provide economic development assistance in northern Minnesota. Other one-time transfers include $734,000 from a Contamination Cleanup Fund, $160,000 from the Capital Access Program and $80,000 from Unemployment Insurance Administration.
The Governor also achieves nearly $1 million in one-time savings by eliminating a new grant program which provides small grants to businesses to help them establish “Section 125 plans,” allowing workers to pay for health insurance with pre-tax dollars.
Governor proposes a package of business tax cuts. A primary economic development strategy of the Governor’s supplemental budget is a package of business tax cuts the Governor says would promote business growth. These proposals provide tax cuts for corporate taxes, investing in various kinds of businesses, and capital gains. The tax cuts increase over time, so they have little impact in the current budget cycle but grow significantly over time.
Emerging problem in Dislocated Worker Program. Around the time the Governor released his supplemental budget proposal, DEED announced that it had discovered a $2.1 million shortfall in the Workforce Development Fund. This fund, which receives its revenues through a combination of federal funds and a fee on employers, supports the Dislocated Worker Program which helps laid-off workers overcome barriers to finding a new job. Anthony Alongi, director of the Dislocated Worker Program, has recommended a plan to fix most of the deficit. His proposal includes finding administrative savings, applying for a $787,000 federal grant and delaying some FY 2010 grant payments into the next fiscal year. Even if all the pieces come together, the program is still about $300,000 short of solving the deficit.
-Scott Russell
Thanks for reporting this information.
My question concerns the Section 125 Health program cuts … do we know how much has been spent in the past ? If companies haven’t taken advantage of this program, it might be more of equating the budget to reality.
Thanks for the question. I hadn’t heard of this program until it came up in the budget presentation. The original grant was $1 million, and $997,900 remains, according to the Supplemental Budget. According to testimony from the Department of Employment and Economic Development (DEED), staff worked with the Minnesota Department of Health and the Minnesota Chamber of Commerce to publicize the program. Here is the link to the Health Department’s description: http://www.health.state.mn.us/healthreform/sec125plan.html Small grants ($350) paid employers for administrative costs. Seven grants were issued. DEED said the program was not well received.