Budget solution overview

Dear Neighbor,

Last week Governor Dayton accepted the framework of legislative leadership’s June 30th budget offer and Tuesday the Governor called the Legislature into special session to resolve the state budget and end the government shutdown. Of significant importance, the 2012-13 state budget did not include any new taxes, fees, or job-killing tax rate increases. Additionally, the budget kept general fund spending to projected revenues of $34 billion, reduced future spending increases by $2.5 billion, and instituted significant structural reforms, particularly in K-12 Education and Health and Human Services, to put Minnesota on a sustainable fiscal path.

I would like to take a moment to explain two elements in the final agreement with the Governor. These were areas of major compromise to end the budget stalemate. First, was the 60/40 K-12 education shift. Education shifts have been used in difficult economic times over the last 20 years. With an education shift the school districts receive 100% of their funding, however, it is over a two-year period. For example, when the shift was 70/30 in 2011, the school districts received 70% of their funding currently and the remaining 30% a few months later in the next fiscal year. Cash flow is the biggest problem in delaying a portion of the school district’s full payment. Therefore, the Legislature’s Education Finance bill included an increase in the per pupil funding formula to pay for short-term borrowing needs. The second element in the final negotiations to end the state shutdown was the tobacco bonds. The state of Minnesota has a future revenue stream from the tobacco settlement. The tobacco bonds essentially sell a portion of these future funds.

It is a privilege to serve you in the Minnesota Legislature. I will continue to advocate for you and our shared priorities of sensible state spending within its means, promoting jobs by creating an economic environment where businesses start, stay, and thrive in Minnesota, and protecting family incomes by helping families keep more of what they earn. Throughout the legislative interim I welcome your continued feedback and involvement. There is still much work to be done and progress to be achieved. We can and will control state spending, change the way government does business, and advance Minnesota for a stronger future.

Sincerely,

Pam

Highlights of the Fiscal Year 2012-2013 General Fund Budget

Taxes:

  • No new taxes
  • No new fees
  • No job-killing tax rate increases
  • Established tax incentives for job creation focused on development of data centers
  • Increased property tax refunds
  • Suspended the Political Contribution Program for two more years
  • Established permanent statutory reductions to Local Government Aid

State Government Finance:

  • Reduced funding for constitutional offices, the Legislature, and state agencies by 5%
  • Consolidated technology throughout state government
  • Established a Sunset Advisory Commission to review state agencies, improve operations, and consolidate programs
  • Linked state employee pay to performance, with salary increases subject to sufficient ratings
  • Established audits to verify dependent eligibility in the state employee health insurance program
  • Established Strategic Sourcing to ensure efficiencies in government purchasing
  • Established tax analytics and business intelligence tools to better collect state taxes and debts
  • Increased spending for Veterans Affairs and Military Affairs by 2.7% and 6%, respectively

Health and Human Services:

  • Started phase out of the 2.0% Medical Provider Tax (sick tax) with complete repeal by 2018
  • Established Healthy Minnesota health care program to move individuals off of public health care in MinnesotaCare to private health care coverage
  • Reformed welfare electronic benefit transfer cards to include the recipient’s name, prohibit the purchase of alcohol and tobacco, and loss of benefits if used fraudulently
  • Reduced the cost curve in health and human services spending from a projected increase of 22% in the next biennium to 4.8%

K-12 Education:

  • Strengthened teacher and principal evaluation
  • Repealed the January 15 negotiation deadline and penalty
  • Established literacy reforms and provided related funding
  • Sunset integration funding in 2013

Higher Education:

  • Increased funding for the state grant program and work study
  • Capped tuition increase in 2013 at 4% for MnSCU two-year institutions

Judiciary/Public Safety:

  • Minimized reductions to core constitutional services like courts, cops and corrections
  • Required prison inmate co-pay for inmate-initiated health care visits
  • Provided Safe Harbors to juveniles sold into prostitution and sex trafficking by treating them as victims, not criminals

Transportation:

  • Focused funding on preserving current transportation and transit systems
  • Improved transit financing and transparency by requiring transit corridor planners to provide the total cost of proposed transit system, including capital and long-term operating expenses

Environment, Energy and Natural Resources:

  • Streamlined water programs within state agencies
  • Funded priorities including emerging issues such as aquatic invasive species and chronic waste disease Agriculture:
  • Prioritized funding to maintain the integrity and safety of the food supply in Minnesota
  • Maintained funding for retail food handling and meatpacking inspections