Minnesota is facing a $426 million deficit in the current budget cycle that needs to be balanced by June 30, 2009. The Governor has the authority to address this deficit through unallotment and he is expected to make an initial round of unallotments by the end of this week. After four hours of testimony at a House Finance hearing on Monday – it’s still not clear where the major cuts will come from.
But here is some of the important math based on a directive from Minnesota Management and Budget (formerly the Department of Finance) and testimony at the House Finance committee hearing this morning:
- $426 million is the projected deficit for the current biennium.
- $155 million will come from the budget reserve – the Governor is required by law to use all funds in the state’s budget reserve before making any unallotments.
- $40 million is supposed to be cut from agency operational budgets. This late in the biennium, it’s not likely agencies will be able to find that much in savings in their operations, so it appears the rest of the $40 million would come from program reductions. This target appears to impact virtually every agency. Agency plans for reaching the target are due back to Minnesota Management and Budget by January 2nd.
- That leaves $231 million. When and where these reductions will come from is still unclear. However, it appears the bulk will come from K-12 Education, Higher Education, Health and Human Services, and Property Tax Aids and Credits (this includes aid to local governments) – probably because these are the largest areas of the state general fund budget. The Governor has expressed a desire to cut payments to local governments, which would have to happen before that payment goes out the door at the end of this month – so the first round of unallotments is expected to happen before the end of this week. Happy holidays!
Naturally, the House and Senate have their own ideas for solving the current year budget deficit. The Senate proposes 1.6% across the board cuts for all agencies. The House held a hearing today hoping to come up with a more strategically targeted proposal. However, while the Governor must consult with a Legislative Advisory Commission, he can unallot without their approval.
The Governor’s unallotment authority is actually quite broad…although there are some grey lines. Nan wrote a helpful blog post back in March with some information on the do’s and don’ts of unallotment if you want a refresher course.