Minnesota state budget (2008-2009)
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Minnesota is facing a $4.6 billion projected budget deficit for 2010-2011 with the aid of federal stimulus funds. Without the extra aid, Minnesota would instead be facing a $6.4 billion budget gap. [1] Minnesota was facing a deficit for fiscal years 2008-2009 however, the deficit was eliminated by withdrawing the remaining $155 million
from the budget reserve and unalloting $271 million. Now the state is expected to end the fiscal year with a balance of $236 million and a $350 million cash flow account.[2]
"We're in the worst recession in the post-war era," said state economist Tom Stinson. Unemployment, already at 7.6 percent in Minnesota and nationally, could rise to 9.4 percent in 2009 and double digits "would not be a surprise," Stinson said. But despite the state's budget woes Gov. Tim Pawlenty said he would "absolutely" oppose any increase in taxes. And although some lawmakers are wary of the use of federal stimulus funds Stinson said that stimulus dollars "may be hiding the long-term problem, but they're certainly helping the state economy in the short term. In the short term, it's welcome relief." [3] The Governor said that the federal stimulus funds, although a one-time source, would allow him to restore $304 million in cuts he had proposed to higher education and pass through a congressional increase in funding for student tuition aid. He also said, revisions to his initial budget recommendation would exempt up to $2,400 in unemployment insurance benefits from state taxation for 2009.[4]
[edit] Impact of budget woes
- In January 2009 Minnesota lost 20,700 jobs moving the unemployment rate up 10 percent from December to a seasonally adjusted 7.6 percent compared to a national rate of 7.6 percent. The Minnesota Department of Employment and Economic Development also reported February 26,2009 that the state has lost 75,000 jobs over the past year. [5]
- Minnesota is projected lose another 70,000 jobs in the 2010. Total job losses could reach 120,000, equal to three years' worth of typical job growth, according to the state's national forecaster, Global Insight Inc. [3]
- Minnesota saw unemployment benefit claims double in February 2009 compared to February 2008, with the number of claims jumping from 19,196 to 39,634. All categories saw double or triple-digit percentage increases in claims. [6]
- The Minnesota State Colleges and University system had about $146 million cut from its budget in early 2009 but in March 2009 the Governor revised his budget recommendations to restore the funds in light of federal stimulus funds. Yet, Rep. Marty Seifert said Southwest Minnesota State University and Minnesota West College may still need to make cuts for 2009 because of money which had already been unallotted. [7]
[edit] Budget background
Minnesota operates on a biennium, covering two fiscal years at a time. A fiscal year begins on July 1 and ends on June 30 of the following year, however the biennium begins July 1 of odd-numbered years. The process of creating a new state budget begins in even-numbered years. All state agencies submit budget requests for the next biennium along with actual expenditures and receipts for the two most recent fiscal years. The Governor then submits a three-part budget to the Legislature. Part one is a budget message, part two a detailed operating budget, and part three a capital expenditures budget. Parts one and two are presented to the legislature in January or February of odd-numbered years and part three is presented to the legislature in January of even-numbered years. Both the House and the Senate examine, modify, and enact the final budget. [8] [9]
[edit] Budget figures
The following table provides a history of Minnesota's expenditures and gross domestic product (GDP).
| Fiscal Year | Expenditures (billions) | GDP (billions) |
|---|---|---|
| 2000 | $35.4 [10] | $185.1 [10] |
| 2001 | $38.0 [10] | $190.2 [10] |
| 2002 | $40.5 [10] | $198.6 [10] |
| 2003 | $41.3 [10] | $208.2 [10] |
| 2004 | $42.1 [10] | $223.5 [10] |
| 2005 | $42.9 [10] | $232.0 [10] |
| 2006 | $44.8 [10] | $242.1 [10] |
| 2007 | $46.7 [10] | $255.0 [10] |
| 2008 | $48.7 [10] | $268.5 [10] |
| 2009 | $50.8* [10] | $282.8* [10] |
- NOTE: The figures for FY 2009 won't be finalized until the end of the fiscal year.
[edit] Ideas about why the crisis exists
- When state lawmakers adjourned in May 2008, the state expected to have $35 billion in revenues for 2010-2011, however job losses and the plummeting stock market have changed that. The state is now expected to receive $4.5 billion less than expected in tax revenues for 2010-2011. According to state officials collections of individual income tax for 2010-2011 are projected to decline by $2.4 billion, or 14 percent. Corporate income taxes are expected to drop more than 40 percent, to about $1.2 billion. [1]
- From January 2008 to 2009, education and health services is the only sector that has added jobs in the state, growing 4.1 percent, or by 17,600 jobs. The sectors losing the most jobs in January were manufacturing, down 9,600, professional and business services, down 5,900, and government, down 3,900. [5]
- According to the state's economic experts real GDP is expected to fall by 2.7 percent in 2009. [2]
[edit] Proposed actions
[edit] Governor Tim Pawlenty
Under the Governor’s revised budget, the total amount of state general fund expenditures in FY 2010-11 would be $32.6 billion, a reduction of approximately 4 percent from the $33.9 billion in general fund expenditures in the current FY 2008-09 budget.
In the revised plan K-12 education funding is increased beyond the level proposed in January, restores funding for the University of Minnesota, increase funding for higher education state grants, put short-term offenders in state prisons, exempt unemployment insurance benefits from state taxes up to $2,400 per individual, and provide an addition $10 million for operation of state courts. Additionally the Governor proposed freezing Health & Human Services and property tax aids & credits at FY 2010-11 levels for the FY 2012-13 budget period. [11] His proposal would cut hospitalization benefits for childless adults on the state-funded General Assistance Medical Care program, instead trying to manage their care through clinics and care coordinators. Pawlenty still aims to cut adults from two other subsidized health care programs, but not until January 2011 when stimulus requirements expire. [12]
“This budget is lean and focused,” Gov. Pawlenty said. “In these tough economic times, we can’t do everything, but we will do what’s important to help get our state moving forward. For starters, government will live within its means and not pile a big tax increase on families and businesses who are already struggling.” [11]
In terms of revenue, the Governor vowed not to raise taxes and instead proposed a $1.3 billion accounting shift in school payments and nearly $1 billion from selling proceeds from tobacco settlement payments. [12]
[edit] Republicans
In light of the state's current budget gap some lawmakers have proposed leveling the state's income tax. A 2009 study of Minnesota's tax revenue revealed that the highest earners pay a lower share of their income in taxes than the rest of the state. However, Republican lawmakers believe that changing the state's tax code is the wrong way to fix the state's budget gap. "That's a killer for small businesses, absolutely a killer," said Senate Minority Leader David Senjem. "That's simply the wrong direction." [13] In an effort to address the state's budget gap some Republican legislators hope to temporarily suspend the state's prevailing wage law. Minnesota's prevailing wage law, on the books since 1973, requires that employees working on state-funded construction projects be paid wage rates comparable to wages paid for similar work in the area where the project is located. Rep. Steve Gottwalt and Sen. Chris Gerlach said that the proposition would help balance the budget by reducing costs in state construction projects and saving millions of dollars. The Minnesota Associated Builders and Contractors support the "time-out" proposal, citing a 2005 study that states that the law increases state construction project costs by as much as 10 percent. [14]
[edit] Democrats
Senate Democrats have a plan to balance the state budget by raising $2 billion in new revenue and cutting spending by 7 percent across the board. The cuts are estimated to equal $2.4 billion and include $973 million in cuts to schools. [15] According to Senate Taxes Committee Chairman Tom Bakk the new revenue would result from a change in the state tax code. According to a 2009 study Minnesota's highest earners pay a lower share of their income in taxes than the rest, and Bakk said that this plan proposes to even that discrepancy. The Democrats plan also relies on $2 billion in federal stimulus funds. "It's important to make the hard decisions and take the medicine now," said Senate Majority Leader Larry Pogemiller said in response to the 7 percent across the board cut. [13]
[edit] Economic Stimulus Package
Minnesota is expected to receive $4.6 billion from the $787 billion dollar economic stimulus. [16] All told, the federal stimulus plan would create or save 66,000 jobs in Minnesota, based on White House estimates. [17]
For more information on how the federal stimulus funds are being used in the state of Minnesota, visit the state recovery website.
According to preliminary reports Minnesota is expected to receive: [16]
- $29 million in law-enforcement aid [18]
- $131 million for weatherization projects for low-income homes [19]
- $54 million for the State Energy Program [19]
- $1.8 billion for Medicaid programs
- $800 million towards schools
- $500 million towards roads and bridges.
[edit] Budget transparency
Disregarding the mandate of Minnesota House File 548, State Government Omnibus bill (2007), Minnesota did not launch a spending database until March 2009 (over one year after the mandated launch date).[20][21] According to an article in the Star Tribune, the Department of Administration had not launched the website because "An old state computer system, which is being updated, is not Internet-friendly. It's not clear if the new computer system will include a spending database because the Legislature didn't appropriate the $1 million to $1.5 million needed for it."[22]
The actual expense of building the site was far less than initially expected. Curt Yoakum, Legislative Liason for the Department of Management and Budget in 2009, said that the spending database was developed with existing resources and a mere $5,000 consulting fee. Apparently the $1 million plus estimate was a bit high. The site's designers even overcame an antiquated accounting system that appeared unsuited to internet.
According to a press release from the Office of the Governor, "The site was created by Minnesota Management and Budget (MMB) and offers on-line, round-the-clock access to data on state payments for schools, local governments, contractors and other vendors. With just a few clicks, citizens can access detailed information on most state spending. The data is supplied by the state's accounting system and updated nightly."[20] Check it out by clicking here.
The Minnesota Office of Grants Management has made this website, where individuals can find out grants that are available.
Additionally, the Minnesota State Arts Board lists the recipients of its awards.[23] 2008 Media Grants, for example, were distributed to twelve individuals and cost a total of $59,000. They included grants for projects such as:$6,000 — for a sixteen-stage video installation that shows the opening scene of sixteen imagined narratives, all informed by the people and events of his northeast Minneapolis neighborhood
- Nathaniel H. Freeman, Minneapolis
$5,000 — for a documentary film, titled, “No Ugly Trees,” that explores women's body and self-esteem issues
- Heather R. Johnson, Minneapolis
$5,000 — for creative time to finish hand coloring “Boris,” an animation about overcoming difficult circumstances to live a happy life[24]
- Daniel J. Lundquist, Bloomington
[edit] Legislation
HF 376 and SF 416 were incorporated into Minnesota House File 548, State Government Omnibus bill, which was signed by Governor Tim Pawlenty on May 25, 2007. Starting in 2008, residents should have been able to search for information on state grants and contracts valued at over $25,000; however, the transparency database was not launched until March 2009. Grants and contracts to local government units will NOT be included in this database. According to the legislation, information would have been stored on the Web site for 10 years.
Prior to the passage of Minnesota House File 548, State Government Omnibus bill, a report by the Minnesota Office of the Legislative Auditor found that the policies and practices used to award and administer grants to nonprofit organizations were "inconsistent and inadequate to ensure accountability."[25] According to the report, Minnesota paid $4.7 billion to nonprofits in 2005, most of which went to hospitals, health plans and large institutional providers. Of that amount, state or county agencies awarded $1 billion to nearly 1,900 nonprofits.
[edit] Government tools
The following table is helpful in evaluating the level of transparency provided by a state spending and transparency database:
| State Database | Searchability | Grants | Contracts | Line Item Expenditures | Dept/Agency Budgets | Public Employee Salary |
|---|---|---|---|---|---|---|
| TAP Minnesota |  |  | | | | |
[edit] Limitations and Suggestions
Minnesota's "Transparency and Accountability Project" site lacks information about state employee salaries
[edit] Support for the creation of the database
In response to a letter from the National Taxpayers Union,[26] Chief Commissioner Dana Badgerow wrote a letter[27] that attributed the delay in posting the database to a lack of funding. While the legislature passed the bill itself, it failed to appropriate a source of funding for the project.
The Minnesota Free Market Institute supports transparency in local government spending, writing "When local governments receive state money both as "Local Government Aid" and in special state financed bonding projects as well as through local property taxes, it's important that citizens get the complete picture of how all their tax monies are being spent at all levels of government, not just the top."
[edit] Public employee salary information
- The Minnesota Transparency and Accountability Project has provided some information about government employee salaries here.
- The St. Paul Pioneer Press has posted a database of over 54,000 state and local government salaries as part of its Data Planet page.
- A listing of the Minnesota state payroll from 2009 is posted here.
[edit] Economic Stimulus Transparency
- The Economic Recovery and Reinvestment Act of 2009 designated $787 billion to be spent throughout the U.S. Of that $787 billion stimulus package, it is estimated that 69%, or over $541 billion, will be administered by state governments.[28]
- Minnesota will receive an estimated $2,514,686,494 [29]
- The economic recovery website to show how legislators and government officials in Minnesota are spending Federal funds is available here.
[edit] See Also
Minnesota taxpayer-funded lobbying
[edit] External links
[edit] References
- ↑ 1.0 1.1 Finance and Commerce,"Minnesota: Stock market collapse, job losses mean less tax revenue in 2010-2011," March 11,2009
- ↑ 2.0 2.1 Minnesota Management and Budget,"February 2009 highlights," retrieved March 18,2009
- ↑ 3.0 3.1 Star Tribune," March 4,2009
- ↑ Star Tribune,"Pawlenty budget plan eases up on cuts," March 18,2009
- ↑ 5.0 5.1 Associated Press,"Report: Minnesota loses 20,700 jobs in January," February 26,2009
- ↑ Post-Bulletin,"More first-timers file for unemployment," March 16,2009
- ↑ The Independent,"Pawlenty cuts higher education a break in revised budget plan," March 18,2009
- ↑ Minnesota Legislative Reference Library,"Resources on Minnesota Issues State Budget," December 2008
- ↑ Minnesota Management and Budget,"2010-11 Governor's Budget Instructions & Forms," retrieved March 18,2009
- ↑ 10.00 10.01 10.02 10.03 10.04 10.05 10.06 10.07 10.08 10.09 10.10 10.11 10.12 10.13 10.14 10.15 10.16 10.17 10.18 10.19 US Government Spending,"Minnesota State and Local spending," retrieved March 17,2009
- ↑ 11.0 11.1 Office of the Governor,"Governor Pawlenty's budget recommendations maintain priorities, position state of recovery," March 17,2009
- ↑ 12.0 12.1 The Seattle Times,"Pawlenty uses stimulus to ease cuts in revised budget proposal in Minnesota," March 17,2009
- ↑ 13.0 13.1 Associated Press,"Minnesota Senate Dems: Tax wealthy, cut spending," March 12,2009
- ↑ Star Tribune,"Prevailing wage law targeted," March 18,2009
- ↑ Associated Press,"Senate Dems: $2B in new revenue, 7% cuts," March 12,2009
- ↑ 16.0 16.1 Fox News,"Stimulus Dollars at Work," March 12,2009
- ↑ American Recovery and Reinvestment Act,"Estimated job effect," retrieved March 18,2009
- ↑ Star Tribune,"Minnesota's stimulus aid will include over $29 million for police," March 6,2009
- ↑ 19.0 19.1 St. Paul Legal Ledger,"Minnesota gets $186 million in stimulus for energy efficiency," March 16,2009
- ↑ 20.0 20.1 Office of the Governor, "OVERNOR PAWLENTY UNVEILS NEW STATE WEBSITE TO ALLOW CITIZENS TO TRACK GOVERNMENT SPENDING ONLINE," March 26, 2009
- ↑ Minnpost.com, "Many states, including Minnesota, lag in putting their spending on the Internet," February 27, 2009
- ↑ Star Tribune, "A blogger's quest: Where's the database?" May 15, 2009
- ↑ Minnesota State Arts Board website
- ↑ 2008 Grant Recipients, Artists Initiative
- ↑ Minnesota Office of the Legislative Auditor, "State Grants to Nonprofit Organizations," January 5, 2007
- ↑ Letter to Commissioner Dana Badgerow, Minnesota Department of Administration, May 28, 2008
- ↑ Letter to Kristina Rasmussen, National Taxpayers Union, June 5, 2008
- ↑ National Taxpayers Union, "A Letter to the Nation's Governors: Ensure Transparency and Accountability by Posting Stimulus Expenditures Online," March 10, 2009
- ↑ Wall Street Journal,"Stimulus Spending by State," March 12,2009
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