What if they can't agree? Unallotment

***Note: This blog entry was originally posted in March 2008 and provides some helpful background information. However, for a more current look at unallotment in the 2009 Legislative Session, read our recent blog post on the subject.***

We’ve gotten a lot of questions lately about what happens if the Governor and Legislature can’t come to agreement about how to solve the state’s budget deficit. The process by which the Governor takes action to address budget shortfalls is called unallotment, and House Research has a great information brief out that addresses the topic.

State statutes (section 16A.152) says that if the Commissioner of Finance determines that there is a deficit, then “the commissioner shall, with the approval of the governor, and after consulting the legislative advisory commission, reduce the amount of the budget reserve account as needed to balance expenditures with revenues.” It goes on to say that any “additional deficit shall, with the approval of the governor, and after consulting the legislative advisory commission, be made up by reducing unexpended allotments of any prior appropriation or transfer.”

Because unallotment is infrequently used, there are many uncertainties about what precisely the law does and doesn’t permit – read the House Research issue brief for all the details, but here are some of the major points:

  • The Governor probably has to spend down the entire budget reserve (currently $653 million) before cutting spending, although this is not totally clear.
  • While the Governor needs to consult with the Legislative Advisory Commission (made up of the Senate Majority Leader, Speaker of the House, Senate Finance chair, House Ways & Means Chair and certain other committee chairs), the legislature does not have to approve the Governor’s unallotment actions.
  • There is not a specific deadline by which the Governor must take unallotment action.
  • No programs are exempt from unallotment. The Governor probably cannot unallot funding for the legislature and judicial branch, but probably can cut appropriations to the constitutional officers (Governor, Lt. Governor, Secretary of State, State Auditor and Attorney General).
  • It is not required that cuts be taken “across the board”.
  • There’s no limit on how much can be unalloted from any one program.
  • The Governor can unallot a transfer from the general fund to another fund.
  • The Governor can unallot from funds other than the general fund, but only to resolve a deficit in that other fund. It does not appear that the Governor can re-allocate dedicated funding sources to the general fund to resolve a general fund deficit.

The bottom line: the Governor’s authority under unallotment provides a much more limited set of choices than legislative budget activity. The only two tools are use of the reserves and cutting spending.

There are several components in the Governor’s proposed budget that it doesn’t appear he could do under unallotment. He can’t raise the $157 million in revenues proposed in his budget, but he also would not be able to implement the $88 million in proposed tax cuts either. Nor would he be able to fund the $62 million in new initiatives in his budget. And I don’t believe he would be able to make his proposed changes to the Health Care Access Fund.

– Nan Madden

About Nan Madden

Nan Madden is director of the Minnesota Budget Project.
This entry was posted in Budget Process and tagged . Bookmark the permalink.

One Response to What if they can't agree? Unallotment

  1. dacman1 says:

    Thanks, that was very informative. Keep up the great job!

Leave a Reply