March 8, 2010
The state Senate has started to lay out the details of the first phase of its budget balancing plan. At a Senate Finance hearing Monday morning, committee chairs presented their budget proposals for higher education; the judiciary; environment, energy and natural resources; and agriculture and veterans affairs. The Senate’s proposed reductions are similar to the Governor’s supplemental budget, although there are some important differences.
Higher Education. The Governor proposed a $53 million reduction to this budget area in FY 2010-11, while the Senate proposes a $48 million reduction. Both the Governor and Senate would cut funding for the University of Minnesota and Minnesota State Colleges and Universities (MnSCU) to the maximum level allowed under federal restrictions connected to accepting stimulus dollars. Funding would be reduced to 2006 levels, resulting in a $36 million cut to the University of Minnesota and a more than $10 million cut to MnSCU in FY 2010-11.
However, the Governor and Senate differ significantly on reductions to financial aid programs. The Governor proposes a $2.3 million permanent reduction to the Minnesota State Grant program, eliminates the 9th semester of financial aid eligibility and ends the Summer Transition Grant program (which helps students pay for summer courses to improve academic skills before they enter college). The Senate does not cut base funding for the State Grant program, keeps the 9th semester of eligibility and partially preserves the Summer Transition Grant program. However, both the Governor and Senate would institute some rationing in the State Grant program to address a shortfall (students and families would be asked to contribute more to the cost of college) and both cut $2.5 million from the State Work Study program (these were new resources just approved last session).
Judiciary. The Governor proposed a $18 million reduction to this budget area in FY 2010-11, while the Senate proposes a $19 million reduction. In general, the Senate proposal cuts the judiciary by 1.7 percent in FY 2010 and by 3.4 percent beginning in FY 2011. As a result, the Senate would cut more from the Supreme Court, Court of Appeals, District Courts and Public Defense Board than the Governor’s proposal. However, the Senate recommends smaller reductions to Civil Legal Services, the Court of Appeals and the Tax Court.
Environment, Energy and Natural Resources. The Governor proposed a $15 million reduction to this budget area in FY 2010-11, while the Senate proposes a $19 million reduction. The Governor’s proposal relied on a number of transfers from special revenue accounts. The Senate felt many of those proposed transfers were not appropriate, so the committee had to look at deeper spending cuts to meet its target. As a result, under the Senate proposal, most areas of this budget received a three percent reduction in FY 2010 and a permanent eight percent reduction beginning in FY 2011.
Agriculture and Veterans Affairs. The Governor proposed a $5.7 million reduction to this budget area in FY 2010-11, while the Senate proposes an $8.0 million reduction. Both the Governor and Senate avoid reductions to the Military Affairs and Veterans Affairs departments. The Senate also adopts most of the Governor’s reductions to agricultural grants and programs. The Senate, however, proposes to significantly delay a portion of the ethanol payments to providers (saving $6.6 million per biennium beginning in FY 2010-11). These payments would be repaid at some point in the future. The Governor proposed a one-time $1.7 million cut in ethanol payments.
The Senate Finance Committee is expected to take up the economic development, public safety, transportation and state government proposals on Wednesday. All of these budget areas are being combined into a single budget bill.
-Christina Wessel
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Budget Proposals, Higher Education, public safety | Tagged: agriculture, budget proposal, civil legal services, Environment, financial aid, higher education, Judiciary, MnSCU, University of Minnesota, veterans | 
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Posted by Christina Wessel
February 15, 2010
The Governor’s supplemental budget proposal for solving the state’s $1.2 billion deficit was released late this morning. (You can see the details of the proposal yourself at the Minnesota Management and Budget web site.) We are pleased the Governor recognizes the importance of additional federal health care aid to the states. However, we are disappointed overall that the Governor continues to focus on balancing the budget solely through cuts, rather than through a more balanced package of revenue increases and tax cuts, which has been a more common path for states to follow.
The largest component of the Governor’s proposal is $387 million from enhanced federal Medicaid funding. Medicaid is a health care program that is jointly funded by the federal government and the states. Under the stimulus bill Congress passed last year, the federal government increased its share of Medicaid funding so that struggling people would not lose their health care during this recession and states would not have to make as deep of cuts into services. This enhanced match was a substantial part of solving the state budget last year. Currently, that funding would end in December 2010, even though the tough economy and state budget deficits are expected to persist. Congress has been discussing extending the increase for another six months. We are glad that the Governor recognizes the importance of this extension in his budget and this further demonstrates the importance of Congress acting quickly to pass the enhanced funding. The Governor acknowledged in his press conference that if Congress doesn’t act quickly, deeper budget cuts will be necessary.
The Governor’s budget also includes $347 million in cuts in health and human services. We will get more details on these cuts on Tuesday and Wednesday as state agency staff explain the cuts to legislative committees, but some proposals include:
- Reducing eligibility for MinnesotaCare from 250 percent of the federal poverty guideline (FPG) down to 75 percent of FPG for adults without children. This would end health care coverage to an estimated 21,500 working Minnesotans who do not have access to affordable health care through their employers, so they pay premiums to access health insurance through MinnesotaCare. This proposal creates a savings to the Health Care Access Fund (HCAF). The Governor’s budget then transfers nearly $160 million from the HCAF to the general fund to help with the state’s budget deficit.
- Cutting supports to families on Temporary Assistance to Needy Families (TANF), a program that helps people get and keep jobs. This is a federally-funded program, so the Governor’s proposal ”refinances” the federal funds, using them to replace state dollars in order to realize savings in the general fund.
- Reducing state funding for child care assistance and capturing other funds that would have gone to counties for child care assistance.
- Eliminating General Assistance – a safety net program for vulnerable adults without children – and converting it to a short-term assistance grant program.
- Reducing continuing care provider rates by 2.5 percent.
There are also $250 million in reductions to aids to local governments (cities and counties). This is in addition to the $300 million that was cut through unallotment last year. The Governor also proposes to make levy limits permanent, which would put a limit on how much local property taxes could grow.
The Governor proposes $47 million in reductions to higher education. As a result of federal stimulus legislation, the state cannot reduce funding for higher education below 2006 levels through the end of 2010. The Governor’s proposal cuts higher education at the maximum level possible without violating the federal restrictions.
As we mentioned this morning, the Governor’s budget also includes a package of tax cuts. The cost for these cuts is largely a mystery. Although there is only a $20 million cost for the Governor’s package in the current biennium, the price grows to $322 million in the next biennium, and the real cost of these cuts won’t be known until four or five years out, as some provisions don’t have a fiscal impact until that time.
The Governor also asks the legislature to ratify his unallotments from last year. Some of that makes sense – like formally approving the K-12 education shift so there is more certainty in how the shift will be implemented. But some of the Governor’s unallotment actions were never subject to public debate and are very controversial – like the elimination of the special diet program that is being reviewed by the state’s Supreme Court, or the deep cuts to the Renters’ Credit that were rejected by the legislature.
We’ll be examining the details of the Governor’s proposal in the days to come. But remember that there is much we can’t learn from the budget pages. For example, how will local governments respond to additional cuts in state aid? Or, how will state agencies implement the 6 percent cuts to their operating budgets and what effect will that have on services?
The Governor’s proposal is just the starting point. What’s next? Legislative committees will start holding hearings to get more details from agency staff. Then the February Forecast will be released on March 2 and we’ll get the final word on the size of the state’s budget deficit for this year. After that, the Governor will probably need to make some modifications to his budget proposal to reflect the February Forecast and the House and Senate will begin to reveal their own budget proposals.
-Christina Wessel & Nan Madden
1 Comment | Budget Proposals | Tagged: budget proposal, child care, FMAP, HCAF, higher education, local government aid, medicaid, tax cuts | Permalink
Posted by Christina Wessel
May 18, 2009
The tax conference committee wrapped up their work on Monday night, the last day of the legislative session. The bill includes elements similar to what was in HF 885, the legislature’s previous tax bill that was vetoed by the Governor:
- A new fourth income tax bracket on taxable income over $250,000 for married couples, as in HF 885. This raises $516 million in FY 2010-11.
- A surtax on income earned from charging interest over 15 percent, also as in HF 885. This raises $216 million.
- $286 million raised from alcohol taxes, slightly more than in HF 885.
- $14 million net raised from additional tax compliance.
The bill also includes two tax cuts:
- $75 million in FY 2010-11 by allowing businesses to get a sales tax exemption at the time they make the purchase (currently they must pay the tax and then apply for the refund).
- $5 million in FY 2012 for Angel Investor Credits for high tech businesses.
The bill also includes the K-12 education shift that the House proposed. The spreadsheet passed out in the tax conference committee indicates the net impact of all bill provisions would be to close the $2.7 billion gap remaining for the FY 2010-11 biennium.
The House and Senate passed the bill in the final hour of the legislative session and it is probably a safe assumption that the Governor will veto this bill, leaving the state’s budget unbalanced for the FY 2010-11 biennium. The Governor has indicated that he will balance the budget through his unallotment authority, although he does have the option to bring the legislature back into special session to try to reach a negotiated agreement. As we have previously reported, the Governor had indicated to the legislature that he primarily plans to cut aids to local governments, other tax credits (such as the Renters’ Credit and Political Contribution Refund), human services and higher education.
-Nan Madden
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Posted by Nan Madden
May 18, 2009
The 2009 Legislative Session ends at midnight tonight, but the state’s budget for FY 2010-11 is far from resolved. The Governor and legislators are still engaged in last minute negotiations, but time is short.
First, let’s review where we stand:
- The state started the biennium with a $6.4 billion deficit projected for FY 2010-11.
- Medicaid matching funds included in the federal stimulus package reduced that deficit by about $1.8 billion, bringing the problem down to $4.6 billion.
- The legislature passed omnibus finance bills that make $1.5 billion in spending reductions ($786 million of those cuts are backfilled with federal fiscal stabilization dollars).
- The Governor signed those omnibus bills, but made several line item vetoes to cut additional general fund spending, including $381 million in health and human services, $3 million in economic development and $2.6 million in higher education.
- So, after incorporating the federal stimulus funds and the approved spending reductions, there still remains a $2.7 billion deficit for FY 2010-11.
Now, let’s look at what has been happening in the final days of session:
The Governor and legislature exchanged a few offers on Saturday and seem to agree on implementing a $1.8 billion shift in education spending. However, the House and Senate have been insisting that the shift be coupled with an increase in ongoing revenues to ensure the shift can be “bought back” in the future biennium.
If an education shift is implemented, that still leaves a $900 million deficit for FY 2010-11. Saturday, the Governor proposed closing that gap through spending cuts to the renters’ credit, health and human services, higher education, and aids to local governments. The legislative response proposed raising about $1 billion in revenue, reducing spending for aids to local governments and other budget areas, and undoing the Governor’s line item veto of General Assistance Medical Care.
There were no negotiations between the Governor and legislature on Sunday. Instead, the House attempted to override the Governor’s line item veto of General Assistance Medical Care and his veto of the tax bill that raised close to $1 billion in revenue. Both override attempts failed.
Today, legislative leadership emerged from a meeting with the Governor around 2 p.m. and said the tax and health and human services chairs will be taking a closer look at those areas of the budget to see if there are some partial solutions that can be agreed on. More discussions with the Governor are expected as the day continues.
If no deal is reached by midnight tonight, the Governor has said he will use his unallotment powers to balance the state budget.
-Christina Wessel
Leave a Comment » | Budget Process, Budget Proposals | Tagged: budget deficit, Budget Process, budget proposal, educations shift, federal stimulus, GAMC, Governor, revenues, Taxes, unallotment | Permalink
Posted by Christina Wessel
May 18, 2009
It’s the afternoon of the last day of the legislative session – a good time to take a quick inventory about what has been finished in terms of tax and local funding issues, and what is still unresolved.
- The noncontroversial policy work of the tax conference committee was passed as HF 1298. This bill includes federal conformity items, provisions about changes to maintenance of effort requirements for local governments, clarification of nonprofit property tax exemptions, and a range of other public finance, local development and technical policy provisions.
- Yesterday, the House was unable to override the Governor’s veto of HF 885, which included a new 4th income tax bracket, increases in alcohol taxes and a surtax on earnings from charging interest over 15 percent.
After moving the noncontroversial tax items into HF 1298, the tax conference committee did not close up shop. In a brief meeting this morning, it was announced that the committee was awaiting instructions from leadership. Issues that could come up include tax changes, but also aids to local governments and tax credits (including the Political Contribution Refund and the Renters’ Credit). By the end of the day, we should know whether the fate of aids to local government and certain tax credits will be determined by a tax conference committee report passed by the legislature, or by the Governor under the unallotment process.
-Nan Madden
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Posted by Nan Madden
May 11, 2009
Over the weekend, the Governor vetoed HF 885, a bill would increase income taxes on the highest-income earners, increase alcohol taxes, and create a new surtax on earnings from excess interest to help maintain adequate funding schools, nursing homes and hospitals.
The Governor has been consistent in his position against tax increases, but poll results indicate that Minnesotans are more interested in a balanced approach to resolving the state’s budget shortfall. A recent Star Tribune poll found that half of respondents supported using tax increases and spending cuts to balance the budget, while only 40 percent thought the budget should be balanced through spending cuts alone.
The particular tax proposals contained in HF 885 are supported by the public. The poll found that 70 percent thought increases in alcohol taxes were acceptable, and Star Tribune also reports there was “strong support” for income tax increases on high-income Minnesotans.
Similarly, public support for the budget areas funded in HF 885 was strong; “three-quarters of respondents opposed cuts to K-12 spending or health care assistance for the low-income and elderly,” reports the Star Tribune. We have seen other polling results consistent with the Star Tribune findings.
It’s not clear what the next steps are in getting to a balanced budget. The Invest in Minnesota Campaign is holding a rally today at the capitol at noon to demonstrate support for a balanced approach to the budget shortfall.
-Nan Madden
Leave a Comment » | Budget Proposals, Education, Health Care, Taxes | Tagged: budget deficit, Budget Process, budget proposal, Health Care, Taxes | Permalink
Posted by Nan Madden
May 8, 2009
Just when you thought you knew what was going on…the Legislature introduced a curve ball on Thursday afternoon. The House and Senate passed a bill, HF 885, to act as a placeholder for a combined tax, education, and health and human services bill. Apparently, this bill is not meant to substitute for the work currently going on in the already formed conference committees, but to supplement it.
The House and Senate immediately appointed a new conference committee to work out the details. The committee met and passed the bill late Thursday night/Friday morning. The committee chairs – Representative Lenczewski and Senator Bakk – noted that the Governor raised just under $1 billion through his proposal to issue bonds. This bill is an effort to raise a similar amount of revenue but not through borrowing. It raises $992 million in revenue using proposals based on the House and Senate tax bills:
- A 4th tier income tax rate of 9.0 percent on taxable income above $250,000 for married filing joint households – raises $516 million in FY 2010-11.
- Increases in alcohol taxes of $241 million.
- The Senate’s provision for a surtax on income raised through excess interest rates, which raises $216 million.
- Increased tax compliance initiatives to raise $19 million.
These revenues go into three new accounts in the general fund. In FY 2010-11, the revenues are distributed as follows:
- $586 million to the E-12 education account.
- $288 million to the nursing homes and long-term care account.
- $114 million to the hospital account.
- $5 million is appropriated to pay for the tax compliance activities.
This bill is an attempt by the legislative majorities to help make their priorities clear.
The 4th tier income tax would blink off in 2014 if the February 2013 forecast shows that there would be a $500 million balance. (This would mean $500 million is left after refilling the budget reserves and cash flow account. Also, any shifts that may be enacted this year would have to be paid off first as well.)
Obviously, some issues are not resolved. It was specifically mentioned that it is not yet determined whether the legislature will pass an education funding shift, nor does this bill necessarily establish the targets for the remaining budget conference committees. Committee members noted that cuts in these priority areas will still occur, but they will be mitigated by raising these revenues.
More details and next steps will be more clear in the days ahead…and any mistakes made while blogging at 12:35 in the morning will be corrected as well.
As a side note – the House and Senate both amended the joint rules to eliminate the 5th deadline which said conference committees were to finish up by midnight on Thursday (as we reported yesterday).
-Christina Wessel and Nan Madden
Leave a Comment » | Budget Process, Budget Proposals, Education, Taxes | Tagged: budget, budget deficit, Budget Process, budget proposal, deficit, human services, revenues, Taxes | Permalink
Posted by Nan Madden
May 6, 2009
***UPDATE: Senator Berglin announced this morning (Thursday) that the HHS conference committee has a target (we’re hearing $503 million in cuts) and plans to meet the deadline and finish by midnight tonight.***
With a number of serious budget issues still outstanding, Speaker Kelliher acknowledged on Wednesday at the Legislative Commission on Planning and Fiscal Policy that the legislature will not meet the May 7th deadline to wrap up conference committees. This is a self-imposed deadline, so missing it doesn’t have any real consequences – it just means arriving at a compromise is getting pushed out closer to the last day of session (May 18th).
Of course, that’s not too surprising to those of us who have been hanging around the Capitol this week. (A little conference committee haiku: We wait in the room. Maybe something will happen, but then it does not.)
There are still major issues that haven’t been worked out, including:
- How to use the federal Fiscal Stabilization Funds (about $816.5 million, most of which needs to be spent on K-12 or higher education).
- Whether to shift education spending (both the Governor and the House have proposed to delay aid payments to schools, the Senate continues to say “no” to this budget gimmick).
- Whether to adopt the Governor’s proposal to bond to balance the budget (both the House and Senate have said “no”).
- Whether to raise taxes – and how much to raise in fees.
And once the House, Senate and Governor can agree on these issues – in other words, once they figure out how much spending they will need to cut – then they can finally set targets for the rest of the conference committees. (FYI – they still hold out hope that the Public Safety, State Government, and Agriculture and Veterans Affairs budget bills could meet the Thursday deadline.)
-Christina Wessel
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Posted by Christina Wessel
April 27, 2009
The House and Senate have been passing omnibus bills galore over the last several days. And that means it’s time to appoint conference committees to reconcile the differences between the two bodies. The House and Senate will each appoint 5 members to each conference committee. The House is maintaining a list of appointments on its Web site. That’s the best place to look for the latest information.
In addition, side-by-side comparisons of House and Senate language for each of the conference committees will be available on the the Revisor’s office Web site (a few have already been posted). If you are going to a conference committee hearing, it’s handy to print this out beforehand so you can follow along with the discussion. There is also another type of side-by-side comparison that summarizes the provisions in the two bills (rather than including the actual bill language). In the past, this summary version of the side-by-side usually hasn’t been posted online (although sometimes you can find it on the relevant committee’s Web site), so you may just have to be at the hearing at the right time to get a copy.
And you can also find the spreadsheets (called “tracking sheets”) detailing the fiscal impacts of the House and Senate proposals at Senate Fiscal Analysis and House Fiscal Analysis.
Remember, according to the deadlines the House and Senate agreed on at the beginning of the session, all omnibus conference committees must complete their work by next Thursday, May 7!
But before conference committees can put together a final bill, House and Senate leadership will have to agree on a new set of “targets” for each committee. How they will compromise on some significant differences remains to be seen: How much (if any) will they raise in revenues? Will they use targeted spending cuts or across the board cuts? Will they shift education spending? And, most significantly, will the Governor be part of these negotiations?
There are just three weeks left in session…and the hardest part still lies ahead of us.
-Christina Wessel
Leave a Comment » | Budget Process | Tagged: budget deficit, Budget Process, budget proposal, conference committees, targets | Permalink
Posted by Christina Wessel
April 24, 2009
Both the House and Senate Health and Human Services omnibus proposals have now been released.
- The House bill language and spreadsheet that have been posted on the committee website (look under “Committee Documents”).
- The Senate does not appear to have the bill or spreadsheet on the web yet. In fact, Senator Berglin still needs to put some finishing touches on the bill. However, I’ve scanned my copy of the spreadsheet (from Friday morning) if you would like to take a look. Berglin said this is the longest spreadsheet ever at 34 pages!
We’re working on a more comprehensive analysis of the House and Senate omnibus bills, but here are a few important differences from the Governor’s proposal (if you want more background on these issues, check out our analysis of the Governor’s budget proposal):
- The House and Senate do not merge the Health Care Access Fund with the general fund.
- They do not cut eligibility for public health care for parents and adults without children.
- They do not eliminate coverage for dental, chiropractic, podiatry, occupational therapy, speech-language therapy, physical therapy and audiology services.
- They leave in place a scheduled reduction in MinnesotaCare premiums and reforms which help children transition more seamlessly from Medical Assistance to MinnesotaCare.
- They do not restructure General Assistance Medical Care to cover only outpatient benefits.
Needless to say, there is other good stuff in these bills…and some bad stuff. If you are one of the experts, I encourage you to post a comment to this blog sharing the positives and negatives you are aware of. Your feedback will help us as we put together our analysis of the bills.
What happens next for these two bills? The House omnibus bill is waiting to be heard on Friday in the Rules Committee (because it missed the deadline) and Ways & Means. From there it will go to the House floor. The Senate Health and Human Services committee is supposed to wrap up today and the bill is scheduled to be heard in the Senate Finance Committee on Saturday at 1 pm. From there it goes to the Senate floor.
-Christina Wessel
1 Comment | Budget Proposals | Tagged: Budget Process, budget proposal, Health Care, health insurance, human services | Permalink
Posted by Christina Wessel
