With less than two weeks left in the 2010 Legislative Session, policymakers are facing some very significant challenges. So, it seems like a good time to review where we are at.
To date, the legislature has resolved $459 million of the state’s projected $994 million deficit for FY 2010-11. The major components are a $312 million omnibus supplemental budget bill and $147 million in savings from the General Assistance Medical Care compromise. Currently, both the House and Senate are moving a K-12 omnibus bill and a health and human services omnibus bill as part of their plan to balance the budget.
But there are two important wild cards facing policymakers this year.
- First, in their budget proposals, the Governor and House have been counting on $408 million from the federal government in an extended enhanced Medicaid matching rate to help solve a major portion of the $994 million budget deficit. These funds would prevent Minnesotans from losing access to health care during these tough times. Currently, Congress is expected to pass the extension later this month as part of legislation extending unemployment benefits. However, the action would come after the legislative session has ended – and there is the possibility that it may not pass at all.
- Second, the State Supreme Court’s unallotment decision has reversed the Governor’s unallotment of a special diet program, at a cost of approximately $5 million. However, there is the possibility that the decision could reverse all of the Governor’s unallotment actions. If that’s the case, policymakers could be faced with a $700 million problem. Why not the full $2.7 billion in unallotments? Well, $1.8 billion can be saved by ratifying the Governor’s shift in education spending – the House already has that provision in their K-12 omnibus bill. Then there is another roughly $200 million that the Governor has the administrative authority to implement outside of unallotment. That would leave $700 million in question.
So, does all this need to be figured out before the legislature adjourns on May 17th? Technically, no. Our Constitution requires that we have a balanced budget by the end of the biennium, so policymakers have until June 30, 2011 to figure it all out. And with the Governor’s unallotment threat removed, he has lost a powerful tool to force a resolution.
However, that doesn’t mean it’s fiscally responsible, or even fiscally feasible, to leave all of these issues unresolved until the next legislative session begins.
Why not? First, the budget clock is ticking. The longer we wait, the more money has gone out the door, leaving less money to cut from and less time to bring in new revenues. In other words, a long delay could result in fewer choices and more drastic budget decisions.
Second, the state has a cash flow problem - meaning when we collect revenues doesn’t always coincide with when we need to write checks. Current projections suggest that the state is heading towards a cash flow crisis, when we will not have enough cash in the bank to pay our bills on time nearly every month starting this September. If we leave a large unresolved deficit, it is more likely that we will need to turn to short-term borrowing from an outside source to help our cash flow.
Timely action is important, but that doesn’t mean all of these issues must be addressed before the session ends. For example, it makes sense to wait and see if Congress passes the Medicaid extension. However, it would be responsible to have a plan in place in case the funds do not materialize by an agreed upon date.
Moreover, it is important that any legislation reflect a balanced approach and an open process.
Whether the Medicaid funds fall through, or the Governor’s unallotments are overturned, the situation just underscores the need to put revenues on the table. If we face a worst-case scenario, resolving the deficit entirely through budget reductions would require brutal cuts to health care for vulnerable citizens, services for people with disabilities, supports that help Minnesotans get and keep jobs, and many other critical areas. These cuts would hit families just as they are struggling to emerge from a deep recession and they would place our state at a competitive disadvantage. We have recently published a report that examines different revenue options and how much they would raise.
The decision-making process must also be an open one. However policymakers ultimately resolve the state’s deficit, the public must have the opportunity to hear the proposals and provide input. A few leaders making decisions behind closed doors may seem expedient, but it also leaves hundreds of thousands of Minnesotans without a voice.
-Christina Wessel
