Minnesota’s April Economic Update shows small improvements

The recently released April Revenue and Economic Update gave us good news about the state’s economic and budget landscape. The quarterly report from Minnesota Management and Budget (MMB) showed that the most recent state revenues have come in slightly above projections, and that the national economy is now expected to grow a little more slowly this year and slightly faster next year.

Some of the top takeaways from the Update include:

1. State revenues are coming slightly above projections. The state’s revenues for February and March came in $84 million above projections; that’s 3.2 percent more than projected in the state’s February 2019 Economic Forecast. The slight increase is primarily due to higher income taxes received. The Update notes that the state will have a fuller picture of total tax year 2018 income tax payments later in April.

2. Overall, future national economic growth is expected to be just above February forecast projections. For this year, economic growth is expected to be slightly slower than earlier predicted. The economic forecasters predict 2.3 percent national GDP growth for 2019. In 2020 and beyond, national economic growth is still expected to grow at a slow pace – but it is now expected to grow slightly faster than predicted in February.

april-economic-update-gdp

3. National unemployment rate expected to remain low. The U.S. unemployment rate has been holding steady at 3.8 percent. It is expected to drop to 3.6 percent in 2019, before creeping back up in 2020. The Update reports that labor force participation has increased very slightly since a year ago, and recent job growth has been above the monthly average.

4. Forecasters are fairly confident in their projections, but give higher likelihood that things will be worse rather than betterThe forecasters assign a 60 percent chance that their baseline forecast is correct. They also give a 30 percent chance for a more pessimistic scenario and assign a 10 percent probability to a more optimistic scenario.

This new Update tells us some good news, but not much has changed since the February forecast. With such slow projected economic growth, the national economy is less resilient, and any sudden shocks to the economy could turn into a recession. This Update points to the importance of the budget reserve the state has built up to prepare for the next economic downturn. It also demonstrates the importance of protecting funding sources for services that Minnesotans count on, including by maintaining the provider tax. This major funding source for affordable health care will expire on January 1, 2020, if policymakers don’t act, resulting in the loss of about $700 million per year in funding for affordable health care and healthy communities.

This is the last quarterly revenue update that policymakers will get before the legislative session ends in May. As they work toward the tax and budget decisions they will enact this year, they should prioritize sustainable revenues that fund quality education, health care, child care, roadways, and transit that reach every community across the state.

-Clark Goldenrod

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Governor Walz’s FY 2020-21 budget proposals in E-12 education and higher ed invest more in Minnesota’s students

Governor Tim Walz’s FY 2020-21 budget proposal includes provisions that support students across the state, as well as more targeted funding intended to narrow the opportunity gaps that students of color face in particular. Overall, Walz’s budget proposes $718 million in additional general fund resources for E-12 education and $165 million for higher education.

An educated Minnesota is critical for the state’s economic success. The state plays an important role in the funding of Minnesota’s schools, and local property taxes often factor heavily into whether the schools have the resources that they need to support children’s learning. Districts with less property wealth often aren’t able to raise the additional funds needed to support their students. A long history of discriminatory housing policies in the United States has limited the ability of people of color to build wealth through homeownership. And for those who do own homes – their homes are often assessed at lower values than homes of their white peers, affecting the district’s tax base.

Minnesota has taken some important steps to help equalize the funding that districts receive, but it is still the case that districts with a high concentration of students of color living in poverty receive less money per pupil than districts with a high concentration of white students living in poverty.

E-12 Education

The governor proposes $718 million in additional funding for E-12 education. He proposes increasing funding for school districts through the basic student formula by 3.0 percent in FY 2020 and another 2.0 percent in FY 2021. That’s an increase of $189 per student the first year and another $130 the second year.

The governor stresses the importance of early learning programs to address gaps in educational achievement and opportunity so that all children can thrive in school. Walz also recommends $47 million in FY 2020-21 to restore the number of slots available for voluntary pre-kindergarten. Without action, a cap currently in place would cut the number of pre-schoolers who can participate in FY 2020 and beyond by more than half. Walz’s funding would lift this cap and make it possible for 7,160 students, or about one-eighth of eligible 4-year-olds, to participate in pre-kindergarten and school readiness programs.

The governor also proposes to increase funding for special education by $91 million. Walz’s proposal would increase student subsidies through the special education formula to create more stable funding for schools to provide services and help reduce the portion of unfunded costs that schools have to address.

Walz proposes $18 million in FY 2020-21 for school districts and charter schools to be used for school safety, including security improvements and counselors. For this funding increase, the governor cites the increase in school shootings and violence in the U.S., and the need to protect students in Minnesota.

The E-12 budget proposal also includes a number of targeted initiatives to make sure that all students, including students of color and students in rural areas, have a high quality education:

  • Levy equalization to better fund schools serving communities with low tax bases to meet the needs of their students;
  • Full service community schools that provide wraparound services that serve primarily low-income and rural communities;
  • A multi-pronged approach to support and recruit teachers of color and American Indian teachers in the classroom; and
  • Funding for tribal contract schools. Currently state per pupil aid for tribal schools is set to decrease by about 50 percent; the governor’s budget would prevent this decline and instead maintain the current formula funding.

Higher Education

In higher education, Walz proposes to make college more affordable through an additional $43 million in FY 2020-21 for financial aid through the State Grant Program. His financial aid proposal contains several components, including:

  • Increasing the annual living allowance for students, equal to about $300 per year for full-time students.
  • Reducing the family contribution in order to make college more affordable for lower-income families. This would effectively increase state grants by about $100 per student.
  • Better integrating child care so that students who have children can receive the supports they need while they complete their education.
  • Adjusting the State Grant amount for students who aren’t eligible for federal aid. Minnesota Dreamers – young people who came to the country as children and do not have legal status – are ineligible to receive federal Pell Grants. However, the State Grant formula currently calculates financial aid assuming that students receive this federal grant, meaning that Dreamers receive much less aid than they need to afford college. The proposal would increase the grant award for these students, making college education more in reach for all of Minnesota’s young people.

The governor also proposes investments that go directly to colleges and universities to improve higher education for students. Over the FY 2020-21 biennium, the University of Minnesota and Minnesota State would receive $51 million and $65 million respectively. These funding increases are expected to help these institutions keep up with the costs involved with educating their students. In return, the University of Minnesota and Minnesota State are expected to maintain the quality of education they provide while minimizing any increases in tuition.

Stay tuned for more analysis as the final FY 2020-21 budget comes together.

-Clark Goldenrod

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Governor Walz’s FY 2020-21 transportation proposal increases gas tax and other revenues to pay for Minnesota’s roads and transit

Governor Tim Walz’s FY 2020-21 budget proposal includes a substantial transportation component. Minnesotans count on their roadways to get to work, school, or community events, and no matter how they get there – whether by bus, car, or bike – having roads in good condition make that trip quicker and safer. His recently released supplemental budget makes some small changes to his original proposal but largely follows the same policies and principles.

Through the governor’s budget proposal, he expects to:

  • Modernize the state’s roads and bridge system;
  • Make investments in programs like MnPASS; and
  • Improve travel on “key corridors” throughout the state and within our state’s cities and towns.

The Department will also use the funding to address snow and ice maintenance on the roads, repair potholes, inspect and maintain bridges, and build a safer transportation system. Transit investments include funding for Metro Mobility, which serves Minnesotans living with disabilities. The funding would also help improve bus service and build out rapid transit lines.

The Minnesota Statewide Highway Investment Plan found that Minnesota needs an additional $6 billion over the next 10 years for the state’s roads. In response, Walz proposes a few funding mechanisms to meet this need. The centerpiece is increasing the gas tax, which has lost about one-third of its buying power since 2000. Walz proposes raising the tax by 20 cents in steps over two years, and then indexing it to inflation starting FY 2023 so that it can keep up with the state’s transportation needs.

In addition, the governor proposes:

  • Increasing the vehicle registration tax;
  • Increasing the motor vehicle sales tax rate from 6.5 to 6.875 percent;
  • Authorizing new trunk highway bonds totaling $2 billion over eight years; and
  • Enacting a 1/8 cent sales tax in the seven-county metro area for transit.

In addition to increasing investment in transportation and transit, the increases in dedicated transportation funding allow the governor to end the recent practice of diverting certain sales tax revenues from the general fund to transportation. This would put about $460 million back in the general fund in FY 2020-21, where it funds investments including in education and community vitality.

-Clark Goldenrod

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Walz tax plan expands Working Family Credit, funds investments in schools and communities

Narrowly defined, the primary responsibility for policymakers this legislative session is to pass the state’s next two-year budget. But more broadly, their focus should be to ensure that our state lives up to its promises, and becomes one where everyone can thrive, regardless of their zip code. To do that, policymakers need to take on some of the things impeding our path to that future. For one, the state’s budget surpluses aren’t expected to last beyond the next couple of years, and funding sources specifically for transportation and health care need to be shored up. And lack of investment in some of our communities means too many of our neighbors have a particularly steep hill to climb to reach economic security.

Governor Tim Walz’s budget takes aim at some of those barriers through investments in schools, health care, and communities. His tax plan raises revenues needed to fund our current commitments as well as the new investments. In this blog, we take a closer look at some of the details including how those revenues would be raised.

Put everyday people first and invest in communities

Walz’s proposal would expand the Working Family Tax Credit, a tax credit for workers and working families that we’ve long championed because of how it boosts incomes, gets children off to a stronger start, and contributes to a fairer tax system. Walz would expand the credit by just over $50 million a year through two policy changes:

  • Providing an expanded tax credit for families with three or more children, making a long overdue update to match the structure of the federal tax credit that the Working Family Credit is based on; and
  • Adding an additional $100 to the Working Family Credit for single or head-of-household filers and $200 for married couples. This increase is meant to offset the impact on these Minnesotans from the governor’s proposed gas tax increase.

The tax plan would also treat homeowners equitably by allowing immigrants who own their homes to gain homestead status. Currently, some Minnesota homeowners pay higher property taxes simply because they use an Individual Taxpayer Identification Number, or ITIN, when they file their taxes rather than a Social Security Number.

In addition, the Walz tax plan would increase funding for state aids to cities and counties by about $60 million per year; this helps fund public services in communities across the state and reduces reliance on local property taxes.

Tax conformity

A major component of tax proposals this year is “tax conformity”, or updating the state’s tax code in response to federal tax changes, primarily the 2017 federal tax bill. Minnesota’s income and corporate tax systems use many federal tax law definitions as their starting point, so when there are federal changes, Minnesota policymakers have to decide whether or not to mirror those changes in our tax code.

Since the federal tax law passed, we’ve argued that Minnesota should not repeat that bill’s flaws. The federal bill provided large permanent tax cuts for corporations, including a 40 percent cut in the federal corporate tax rate. In contrast, tax cuts for individuals and families are temporary, and the largest tax cuts go to high-income households. And overall, the federal bill harms the nation’s ability to fund essential services.

Minnesota instead should put everyday people first in its approach to conformity. For individuals and families, Walz’s income tax conformity proposal would maintain many of the deductions, exemptions, and other state-level tax benefits that would be lost if the state simply conformed to the federal bill.

Given the sizeable federal tax cuts for corporations and businesses, it makes sense for the state to recapture a portion of that tax benefit to fund needed investments in our schools, communities, and other building blocks of broader prosperity in Minnesota. Walz’s tax conformity proposal would raise $899 million in the FY 2020-21 two-year budget cycle and $819 million in FY 2022-23 from corporations and businesses. While the federal tax bill deeply cut the corporate tax rate, it also “broadened the base” or expanded the share of business profits that are taxable. The governor’s tax plan raises revenues by adopting many of these base broadeners, as well as some changes that reduce taxes (such as federal rules for accounting for purchases of new equipment).

Reverse past tax cuts that have proven to be unsustainable and unaffordable

Another way that the governor’s tax plan would stabilize state revenues is by reversing or freezing three tax cuts passed in 2017 that are growing in cost in each year. His proposal would reinstate inflationary adjustments on tobacco taxes and the statewide property tax paid by businesses, and freeze the exemption amount in the estate tax at current levels (rather than allowing it to rise further). These provisions would raise $76 million in FY 2020-21 and $231 million in FY 2022-23.

Shore up dedicated funding sources for transportation and health care

In addition to the tax provisions described above, which largely impact the state’s general fund and are contained in House File 2125, Walz takes other measures to maintain and strengthen funding sources that go to specific areas of the budget.

  • He would maintain the health care provider tax, rather than allow it to expire. This would prevent the loss of about $700 million a year in dedicated health care spending. His health care proposal would also create a state tax credit to put a cap on how much Minnesotans can pay for premiums if they buy insurance in the individual market.
  • Walz’s transportation proposal would raise the gas tax in multiple steps, ultimately increasing it by 20 cents a gallon, as well as increase other funding sources dedicated to transportation. Not only would this help the gas tax regain its buying power and fund needed transportation improvements, but it also would allow the governor to end the recent practice of using general fund dollars to fund transportation investments, leaving less available for schools, human services, and the many other state services that vie for funding in the general fund.

The governor’s tax bill is a strong foundation to start from as the state’s tax debate moves into the next phase. We’ve encouraged policymakers to add additional progressive tax components as they develop their tax plans, and the House’s proposal to strengthen the Renters’ Credit for lower-income Minnesotans is one good example of how to do so.

-Nan Madden

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Senate budget targets call for few investments, mostly flat funding

The Minnesota Senate’s budget targets, released last week, give a high level picture of their budget outline. The Senate’s “Advancing Minnesota” budget makes new investments primarily in education and health and human services, leaving most of the budget areas with the same amount of funding as projected in the February Forecast.

The targets are an important milestone in the budgeting process. They set the size of the Senate’s omnibus budget, tax, and bonding bills. Each legislative body sets their own targets, and the House released their targets last week. Proposed targets describe the net changes to state general fund spending in each area, and could also reflect revenue increases or transfers between funds.

Senate General Fund Targets (net changes) FY 2020-21
E-12 Education $206 million
Health and Human Services $147 million
Higher Education $100 million
Agriculture, Rural Development, Housing $30 million
Judiciary and Public Safety $25 million
Energy and Utilities $0
Commerce and Consumer Protections $0
Veterans and Military Affairs $0
Transportation $0
Jobs and Economic Growth $0
Capital Investment, Debt Service $0
State Government and Elections -$16 million
Environment and Natural Resources -$57 million
Taxes $0
Other Bills -$18 million
Total  $417 million

The largest proposed target is in E-12 education. Senate leadership has indicated that some of this target will go to school safety. In addition, the Senate lists mental health, elder care, and child care as priorities. They also indicated that their budget will not maintain the provider tax, a major funding source for health care for about 1 in 5 Minnesotans.

Many of the Senate’s targets are $0, meaning that they include no additional spending over the FY 2020-21 baseline. Unlike the governor and House – who commit to raising additional dedicated funding for transportation and reducing general fund spending in that area – the Senate leaders say their transportation plan will solely rely on existing funding.

The targets leave some important questions unanswered. The total changes add up to $417 million, substantially less than the $1.1 billion surplus projected for FY 2020-21. It’s unclear whether the remainder would be left unspent “on the bottom line,” or used in some other way. Another key question is what the Senate has planned regarding revenues. The Senate’s budget plan includes a target of $0 for their tax bill, which they describe as a tax conformity bill. However, their targets also indicate that their FY 2020-21 budget will bring in $557 million less in general fund revenues. It’s unclear how this would be achieved.

Stay tuned for more analysis of how the pieces of the budget bills come together.

-Clark Goldenrod

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Provider tax: The proven way to fund affordable health care for Minnesotans

Minnesota’s health care provider tax generates about $700 million each year to support affordable health care and investments in healthy people and communities. Under current law, the provider tax is set to expire in December of this year. The Minnesota Budget Project strongly supports maintaining the provider tax to make sure that our Minnesota neighbors and colleagues can continue to have affordable health care when they need it most.

Minnesota’s provider tax is a proven and time-tested way to ensure Minnesotans have affordable health care. In contrast, the state of Michigan experimented with a few types of health-related taxes, and discovered various problems with these alternative sources – including insufficient revenues and problems with federal regulations.

Michigan’s experience with a claims tax illustrates the risks and challenges with that type of funding mechanism, primarily related to failing to raise adequate revenues. In 2011, Michigan created the Health Insurance Claims Act (HICA): a 1 percent tax on all health insurance claims paid in the state. The state projected the HICA would raise between $375 million and $400 million to support the state’s Medicaid services; however, actual revenues were much lower and left a large gap in state funding for Medicaid, putting health care for those most in need at risk. The state continued to tinker with the tax rates and explored other revenue options, but problems persisted: Michigan’s HICA never managed to raise the projected amount needed. Minnesota’s provider tax has decades of history, which supports solid, reliable projections for accurate budgeting and planning to make sure Minnesota’s investments in healthy people and communities stay on track.

Michigan also experimented with a tax on Medicaid managed care organizations, which was flagged as problematic by the federal Centers for Medicare & Medicaid Services (CMS). Alternative types of revenue raisers can spell potential litigation and challenges with federal guidelines. Federal law allows provider taxes to fund Medicaid, and 49 states have some type of provider tax in place. However, there are restrictions: the taxes “must be broad-based, uniformly imposed, and cannot hold providers harmless from the burden of the tax.” ERISA, the Employee Retirement Income Security Act of 1974, also adds complexity in the case law regarding what types of taxes can and cannot be imposed. Minnesota’s provider tax has been in place for decades and has held up to legal scrutiny – other types of revenue raisers have not been tested in this way.

Minnesota has an infrastructure in place when it comes to provider tax implementation and collection. During the 27 years that the provider tax has existed, the Minnesota Department of Revenue and health care providers have developed systems and procedures to remit and collect the taxes. Starting from scratch with a different type of tax would be a bureaucratic challenge. While sometimes it makes sense to start fresh in order to implement a new, better, or more effective idea, in this case, shifting away from the provider tax to an untested alternative would result in a great deal of administrative work and costs for a change that is simply not needed.

Minnesota policymakers must act this session to extend the health care provider tax, or we will experience a serious blow to our ability to put affordable health care in reach for all communities. And while the provider tax is critical for Minnesotans’ health, if it is eliminated the consequences could be much broader. A budget hole of $700 million if the state fails to extend the health care provider tax – or if an alternative revenue source fails to live up to projections – would create stress on other important Minnesota priorities like K-12 education, roads and transit, and public safety. Protecting the tried and true health care provider tax will help ensure investment in Minnesotans’ health and in our state’s thriving communities. Minnesota is a leader in health care, and the well-being of our families and neighbors is too important to risk.

-Betsy Hammer, with thanks to our colleagues at the Michigan League for Public Policy

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Governor Walz’s revised budget proposal raises additional revenues, adjusts spending to build shared prosperity

Last Friday, Governor Tim Walz released an updated budget proposal that responds to the less rosy state economic forecast released in late February. The revised budget retains the Walz/Flanagan administration’s “One Minnesota” priorities, and augments the surplus by maintaining and raising revenues to invest in health care, education, broader economic opportunity, and transportation.

The original budget anticipated that the surplus would shrink by the time the February Forecast came around, and left $789 million unspent, or “on the bottom line”, which created a cushion that absorbed much of the reduction in the surplus. In addition, Walz’s revised budget adapts to the new forecast figures by:

  • Reducing its new general fund investments by $131 million through a combination of scaling back some original proposals and using other funding sources, such as federal or dedicated funds, to fund certain initiatives;
  • Raising $65 million more in general fund revenues than in the original tax proposal; and
  • Transferring $142 million of unspent health care reinsurance funding back into the general fund.

The revised budget also includes $37 million in new investments that were not in the original budget proposal, the largest of which go to higher education.

Here’s a look at some of the more specific revisions to the Governor’s budget proposal.

New investments

While many budget areas saw only slight adjustments, one area of substantial change was higher ed. The University of Minnesota and Minnesota State systems would receive additional dollars to support their students under the governor’s latest proposal. Over the FY 2020-21 biennium, the University of Minnesota and Minnesota State would receive an additional $51 million and $65 million respectively, an increase of $25 million from the original budget. These funding increases are expected to help these institutions keep up with the costs involved with educating their students. In return, the University of Minnesota and Minnesota State are expected to minimize any increases in tuition.

Health and human services

Walz’s revised budget includes changes in the realm of health and human services. Fortunately, many of our priorities in this budget area, including the repeal of the provider tax sunset and the $100 per month increase to the MFIP welfare cash grant, are retained in the revised budget.

Child care assistance (CCAP) would see several major changes compared to the governor’s original proposal. While it would still receive a funding bump to take 1,000 families off the waiting list, other provisions changed significantly. For example, child care providers would see one near-term increase in their reimbursement rates under the updated proposal, but future rates would not be automatically updated every three years (as was the case in Walz’s original proposal). This change reduces the amount going to increasing provider rates by $46 million in FY 2022-23. This is an issue policymakers will need to revisit, as reasonable reimbursement rates for providers is an important factor in ensuring parents have options. The governor’s revised proposal also includes over $2 million in FY 2020-21 in new spending on oversight and integrity of CCAP, including 10 additional staff members to analyze data and conduct inspections. 

Finally, more money will be returned to the state’s general fund and health care access fund (HCAF) due to updated projections for the Minnesota Premium Security Plan (also known as reinsurance). Reinsurance provided payments to health insurance companies to reduce costs in the individual health insurance market, and the program is set to end in 2019. The updated numbers show $142 million transferring back to the general fund, and $394 million transferring back to the HCAF. Final numbers will be available later this year.

Taxes

The revised budget retains the original focus on raising the revenues needed to fund health care, transportation, and other services Minnesotans count on to thrive. It proposes raising an additional $65 million in general fund revenues FY 2020-21 through a set of four measures they identify as addressing corporate loopholes, and by changing the timing of two existing tax proposals.

One challenge facing the state outlined in the February Forecast is that Minnesota has a forecasted surplus in the near term (the FY 2020-21 biennium) but falls just short of having enough revenues coming in to cover anticipated spending in the next budget cycle (FY 2022-23). Walz’s budget proposal balances in each of the two budget cycles, in part by carrying forward positive balances at the end of FY 2020-21 to cover expenses in FY 2022-23. Walz’s budget makes needed investments in our future prosperity and proposes raising additional revenues fund those investments; there will still be more for policymakers to do reach sustainability past the four-year budgeting window.

What’s next

The House released their budget targets earlier week, and the Senate released their targets today. These targets set the stage for both legislative bodies to start putting together their FY 2020-21 budgets. Stay tuned to stay up to date on how the state’s budget comes together!

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House budget targets call for revenue raising, investments in education

The Minnesota House’s budget targets, released this week, tell us how lawmakers propose to allocate the state’s projected $1.1 billion surplus for FY 2020-21. The House’s “Minnesota Values Budget” makes substantial investments in education, as well as other budget areas, and includes a $1.5 bonding bill. The House targets also would raise additional revenues to support new investments, given the short-term nature of the projected surplus.

The targets are an important milestone in the budgeting process. They set the size of the House’s omnibus budget, tax, and bonding bills. Each legislative body sets their own targets, and the Senate is expected to announce their targets Thursday.

House General Fund Targets (net changes) FY 2020-21
Education $900 million
Higher Education $305 million
Capital Investment (debt service) $142 million
Health and Human Services $129 million
Public Safety $121 million
State Government $103 million
Greater Minnesota Economic Development $100 million
Judiciary $91 million
Jobs and Economic Development $84 million
Environment and Natural Resources $33 million
Housing $26 million
Agriculture $7.6 million
Veterans and Military Affairs $4.3 million
Energy and Climate $2 million
Other Bills $15 million
Transportation -$425 million
Taxes and Local Aids $1.2 billion

The largest proposed targets are in E-12 Education and Higher Education. House leadership indicated that this money would support all Minnesota students and freeze tuition at public higher education institutions. While the House targets are broadly similar to the priorities laid out in Governor Tim Walz’s budget proposal, this is one area where they go further.

The proposed targets describe the net changes to state general fund spending in each area, and could also reflect revenue increases or transfers between funds. For example, the -$425 million general fund target for Transportation should not be interpreted as calling for a $425 million cut in transportation funding. It likely reflects reducing the amount of general fund dollars going toward transportation and instead using the more traditional dedicated transportation funding sources. House Democrats announced that their Transportation target accounts for a phased-in 20-cent increase to the gas tax, similar to the governor’s proposal.

This budget plan raises general fund revenues as well. When House leadership announced their targets, they emphasized the need for sustainable funding to support quality schools, affordable health care, and economic security. While the details will be released in the next few weeks, they emphasized their tax bill would prioritize seniors, working families, and farmers – in contrast to the 2017 federal tax bill, which provided large, permanent tax cuts for corporations.

Stay tuned for more analysis of how the pieces of the budget bills come together.

-Clark Goldenrod

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We’re hiring a summer research intern!

The Minnesota Budget Project is hiring a research intern who will make a significant contribution to our work on immigration policy and economic trends affecting immigrants in Minnesota. This intern will conduct research and work with Minnesota Budget Project staff to produce analytic materials. The ideal candidate will have strong quantitative and data analysis skills.

The Minnesota Budget Project is an initiative of the Minnesota Council of Nonprofits that combines sound research and analysis with advocacy, engagement, and communications strategies to advance policies that expand opportunity and economic security in Minnesota.

This is a paid internship. Candidates who have the lived experience moving to the United States or have interacted with the U.S. immigration system are encouraged to apply. More information, including how to apply, is available on the Minnesota Council of Nonprofits website. The application deadline is Friday, April 5.

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Federal shutdown is over – but harm hit home

The partial federal government shutdown that began on December 22, 2018, and concluded on January 25 of this year was the longest on record. Federal policymakers reached a deal on the remaining areas of the budget, and another shutdown has been averted. However, the lengthy shutdown caused real and significant harm to people – particularly those in the worst position to weather the storm – and the economy as a whole.

The shutdown caused very real impacts to our Minnesota neighbors. Two important programs that low-income families use to put food on the table were in jeopardy: the Supplemental Nutrition Assistance Program (SNAP), which helps nearly 500,000 Minnesotans afford groceries each month, and WIC, the Women, Infants, and Children program, through which 100,000 Minnesota kids and moms per month afford nutritious food. In the case of SNAP, payments were distributed on a different schedule during the shutdown to ensure that families could continue to grocery shop – which will result in a larger than normal gap between receiving February and March payments for many families. Had the shutdown continued, both SNAP and WIC would have depleted reserves to the point that families would have received reduced money for food.

Services that provide families with affordable homes and shelter were also at risk during the shutdown. More than 93,000 Minnesota households have a roof over their heads thanks to federal housing assistance, and more than 90 percent of those households include kids, elderly people, or people with disabilities. In the event of an extended federal shutdown, depending on contract and lease timelines, families start facing extreme increases in rent and possible evictions as the federal funding runs out; the timelines vary by program. In addition, billions of federal dollars aimed at tackling persistent homelessness across the county would also be at risk during a shutdown.

Most health care programs were not affected by the partial shutdown. However, the Indian Health Service (IHS) did experience shutdown impacts. Due to the unique relationship between the United States government and federally-recognized Tribal governments dating back hundreds of years and many treaties, this federal agency provides health care to American Indians and Alaska Natives. During the shutdown, workers in the Indian Health Service – including many medical professionals directly providing health care – had to work without pay. Minnesota has 11 federally recognized Tribes and three direct service programs, where about 500 employees provide health care and support services.

Federal and contract workers also suffered hardships: 800,000 federal employees did not get paid. Federal contractors, many of whom serve in low-wage roles like food service or sanitation, did not get paid and will likely not be eligible for backpay. Over 5,000 Minnesotans are federal workers who went without pay due to the shutdown; the number of federal contractors in the North Star State is unknown. Some corporations offered payment relief or deferrals for those workers affected by the shutdown. However, personal financial obligations don’t pause just because the paychecks did: rent or mortgage payments are still due, car payments must be made, groceries still cost money, credit card bills continue to rack up interest, and child care providers require payment so kids don’t lose their spots. Those obligations add up and put significant pressure on family budgets.

The direct impacts of a shutdown are not shared equally: African American workers are more likely to be federal workers. According to U.S. Office of Personnel Management 2016 data, African Americans make up over 18 percent of the federal workforce, compared to 11 percent of the civilian labor force. African American women compromise nearly 11 percent of the federal workforce but about 6 percent of the civilian labor force. The lengthy history of discriminatory practices and racial disparities in savings and wealth-building also make it more challenging for workers of color to cover gaps in pay.

The shutdown also had an impact on the economy as a whole. White House economic experts estimated the shutdown would result in a 0.1 percentage point drop in economic growth each week during the shutdown, due to both direct and indirect impacts.

The full economic effect of the shutdown will take time to unfold. Meanwhile, Minnesota’s state economy is intrinsically tied to the national economy, and slower economic growth could cause damage at the state level, too. State economic experts include national economic data in their models to project state economic data and growth. The monthly state economic update showed a softening in state revenue projections prior to the federal shutdown, and the state’s February forecast also showed slower economic growth and an overall softening.

Minnesotans experienced tangible hardships during the federal shutdown, and the effects were greatest for those least able to afford it. It’s a good thing that a deal was reached to fund the budget and avoid a continued shutdown. However, the unrelated anti-immigrant policies that tangled the budget negotiations continue to be prominent on the national stage. The right solution is to avoid another round of shutdown showdown politics at the next round of negotiations later this year – and keep the government open with a clean funding plan.

-Betsy Hammer

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