The deal is done…but the problem isn't solved

Legislators and the Governor finally came to an agreement yesterday to solve the state’s $935 million budget deficit for the current biennium (FY 2008-09). But the final deal does little to address the bigger financial troubles facing the state for the FY 2010-11 biennium.

What are some of the major components of the budget bill? See Nan’s blog entry to find out about taxes or to get more background on any of these issues check out our recent analysis of budget proposals.

  • $500 million from the state’s budget reserve, leaving just $153 million (plus the $350 million in the Cash Flow Account). Using such a sizeable chunk of our reserves with more deficits looming in the near future is not a wise move. Reserves are more appropriately used to buy time to implement long-term budget solutions. However, with the possibility of raising revenues off the table, tapping the reserves likely prevented further reductions to services for low-income families…for the moment.
  • In K-12 education the final agreement adopts the House proposal to include a one-time $51 per pupil increase to school districts. The House proposal made significant cuts to the Governor’s QComp program to partially cover the costs of this increase, but the final agreement makes a much smaller reduction to QComp. The result is that K-12 education goes from contributing $7.6 million to solving the deficit (in the House/Senate agreement), to contributing nearly $26 million to making the deficit larger.
  • The final Health and Human Services agreement includes some important changes from House and Senate proposals. The final budget bill refinances $80 million in federal TANF funds to help resolve the deficit, also uses $50 million from the Health Care Access Fund (to be repaid), and grabs other available resources, including $9.2 million in federal child care funds. On the positive side, the final agreement provides some funds for long-term homelessness, food shelves, MFIP work support grants for counties and a COLA for nursing homes. On the negative side, the final agreement does not repeal the MFIP family cap, drops grants to help low-income working families repair their cars, reduces all Dept. of Human Services and Dept. of Health grants by 1.8%, and cuts funding to hospitals.
  • The Health Care Reform bill (which passed separately from the budget bill) makes some modest improvements in access to health care. Senator Berglin stated on the floor that this bill went from insuring 40,000 additional people when it originally left the Senate, to just 12,000 in the final version. The bill includes provisions to expand access to MinnesotaCare, reduce premiums and help people stay on MinnesotaCare…although some benefits don’t take effect until the next biennium. I’ll leave it at that for now, since we’re still figuring out the details on this bill.
  • In Higher Education, reductions to MnSCU and the University of Minnesota in the final agreement were far below the Governor’s recommendations, but still higher than the House and Senate proposals.
  • The final Economic Development agreement tranfers resources from the Workforce Development Fund ($8 million) and the Jobs Skills Partnership ($2 million) to help solve the budget deficit.
  • The final agreement raises a surprising amount of money – a projected $21 million – through increased tax compliance by the Dept. of Revenue. This is more revenue than had been proposed in any previous bill.

This is just the quick first look at what happened. More analysis will be forthcoming in the coming days!

And if you have more information to add…please post a comment! We think we fixed a setting that was making it difficult for people to leave comments, so hopefully you no longer need to log in.

-Christina Wessel

About Christina Wessel

Christina served as the Minnesota Budget Project's deputy director until January 2014.
This entry was posted in Budget Process. Bookmark the permalink.

4 Responses to The deal is done…but the problem isn't solved

  1. Jessica says:

    As someone who has researched the statewide effects and impacts of the family cap, I can objectively state that the family cap law has failed as a public policy. The law was intended to discourage single poor women from having children. However, the cap did not stop children from being born into poverty. More than 6,000 children have been born into poverty and have been explicitely excluded from assistance. Further, while the law was focused on single mothers — an estimated 25 percent of families affected by the family cap are two parent families.

    The Department of Human Services has data that show more than 900 families affected by the family cap have severe disabilities: retardation, low IQ, mental illness, and physical illness. Thus, one might question whether some of these families are making a cognizant choice to have more children.

    We know the costs of childhood poverty are steep and devastating to the state economy. The family cap law saves the state $3 million each year, but we have yet to determine what costs we may incur by failing to provide assistance to 3,000 poor children each month in Minnesota.

  2. Layla says:

    Ummmm, so why is the Family Cap considered a bad thing? I am an Employment Counselor in Minneapolis, and i stand behind the Family Cap 100%! So, lets continue supporting mothers who continue to have children even know they are in no position to support the children they already have. How about we spend some money on family planning? I have motivated, skilled, ambitious clients…but the majority of my clients have multiple barriers and need to focus on a few other things before creating more children. The Family Cap NEEDS to be present at all costs…not just because a Catholic group feels it is unjust. How about THEY support the families that need increases in benefits because the client STILL hasnt found a job….STILL hasnt obtained their GED…STILL hasnt addressed their mental health issues. We can only do/say so much as Employment Counselors, but man, if i could be frank with my clients….some of them may take another look in the mirror and realize that its time to make some changes in their lives. I dont think giving them in increase in their grant if they DECIDE to have more children will help accomplish that.

  3. Christina Wessel says:

    They did use $50 million from the Health Care Access Fund…but Senator Berglin described it as a loan from HCAF to the general fund which will be repaid through savings generated by the health care reform bill.

  4. OSJ Organizer says:

    In the budget fix proposals, did any money from the Health Care Access Fund (HCAF) get used?

    FWIW- I’ve loved this blog this session. Thank you so much, and keep up the great work!

Leave a Reply