House budget plan is a mix of cuts, shifts, one-time resources and…revenues!

The House DFL caucus released their “framework” for balancing the budget this afternoon. The proposal uses a mixture of one-time resources (federal stimulus dollars and a shift in education funding), spending cuts and revenue increases. The House plan also balances the budget through FY 2012-13. We’ve posted a copy of their overall budget proposal, as well as the committee targets.

The major components of the proposal include:

Spending reductions: $1.6 billion. Unlike the Senate plan, which went with across the board spending reductions, the House targets their spending cuts:

  • $6 million reduction in Workforce Development
  • $250 million reduction in Tax Aids and Credits
  • $400 million reduction in Health Care & Human Services
  • $16 million reduction in Housing & Public Health
  • $21 million reduction in Environment & Natural Resources
  • $15 million reduction in Agriculture & Veterans Affairs
  • $2 million reduction in Energy
  • $9 million reduction in Cultural & Outdoor Resources
  • $8 million reduction in Transportation
  • $66 million reduction in Public Safety
  • $49 million reduction in State Government

You may realize that Early Education, K-12 Education and Higher Education are missing from the list above. And if you have a calculator, you may also figure out that the list only adds up to $843 million. Here’s where the rest of the $1.6 billion in cuts comes from: There will be about $750 million in cuts to education (as yet unspecified), but those cuts will be backfilled with $750 million in federal stimulus dollars – so the three education areas of the budget do not get any real cuts in the House plan in the FY 2010-11 biennium.

Budget gimmicks: The House employs the shift in education payments – which means delaying a portion of the state aid owed to school districts from one fiscal year to the next. Normally, schools get 90% in one year and a 10% settle-up payment the following year. The House would increase the size of the shift to 73% in the first year and a 27% settle-up in the following year – saving the state $1.8 billion in FY 2010-11. (Note that the Governor’s proposal includes an 80/20 shift, saving $1.3 billion).

Revenue increases: The House recommends $1.5 billion in revenue increases in FY 2010-11 (and $2.9 billion in FY 2012-13). Speaker Kelliher was very insistent that these increases will be progressive. However, it’s up to the House Tax Committee to come up with the details.

The House would also put $250 million back in the state’s budget reserves.

Remember, April 16th is the deadline for the major finance divisions in the House and Senate to finish up their omnibus bills. Now that the targets are out in both bodies, committees can begin putting those bills together.

We’ll be working to put together a comparison of the Governor, House and Senate proposal in the coming days – including a look at how they handle FY 2012-13. As always, more to come…

-Christina Wessel

About Christina Wessel

Christina served as the Minnesota Budget Project's deputy director until January 2014.
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One Response to House budget plan is a mix of cuts, shifts, one-time resources and…revenues!

  1. Dan Hoxworth says:

    I am disappointed that the legislature is not utilizing the budget crisis in MN to create a truly progressive tax system & instead is relying on accounting shifts. There is a clear structural deficit using accounting shifts only prolongs the misery. Our governmental bodies need to be leaders in transparency and good business practices and not using measures that got our financial system in such a mess.

    Lead by example please. Expand the sales tax to services, create an upper bracket for households making over $250,000 and eliminate the state income tax on people making less than $30,000 a year. Finally, work to ensure that communities have other resources than property tax revenues to meet their needs. That would give us a progressive tax system.

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