What's happening with MOEs this session?

At the end of the 2008 Legislative Session, we blogged about a last-minute change to the omnibus tax bill that had set off a flurry of activity and interest in maintenance of effort (MOE) requirements. MOEs are state requirements that local units of government spend a certain amount of money each year in a particular policy area. Most MOEs apply to county spending in areas of social service delivery (e.g., mental health, chemical dependency and child care), but cities must also meet MOEs for their commitments to libraries. Some MOEs require the spending in order to access matching funds from the state or federal governments, but many MOEs are simply mandates requiring the local units of government to fund policy areas at some base level. Every MOE appears to be structured slightly differently than the next.

The language in last year’s tax bill suspended all MOEs for years when levy limits (which restrict how much local governments can raise in property taxes) are in place. This change would have provided cities and counties more flexibility to determine how to balance their budgets and allocate spending while their resources were tight from reduced state aid and levy limits. However, it also essentially removed a critical tool the state and stakeholders have for ensuring local governments provide adequate services for vulnerable residents (e.g., the mentally ill). Moreover, some of the county MOE spending is used to provide matching funds for drawing down federal funds, and the state was not prepared to replace those funds if the counties reduced spending. Consequently, Minnesota could have lost critical federal dollars.

Soon after the 2008 Session ended, there was an agreement between the Legislature and Governor to instruct cities and counties that the legislation would be repealed at the beginning of the 2009 Session. And, indeed, it was. However, the attention brought to the issue was powerful enough that legislators committed to examining the issue closer.

Advocates in two of the largest MOE policy areas, libraries and mental health, recognized that the required levels of spending do not allow room for reductions and thus make balancing a local budget difficult in economically tight times. Advocates worked over the past year to create a compromise on setting funding levels in their policy areas. The mental health compromise appears in HF 986 and SF 1504 and the library compromise appears in the House omnibus tax bill.

However, there is additional language in the House omnibus tax bill that would consolidate the spending levels for the majority of the MOEs (including mental health and chemical dependency, although child care is excluded). The consolidation wouldn’t take place until 2012, but there is some concern that the plan is vague and stakeholder groups haven’t had a chance to help vet the proposal. They should get their chance, as the legislation also creates the Legislative Commission on Mandate Reform and charges it with examining these issues more closely.

-Beth Haney

About Beth Haney

Beth Haney was a project manager and research consultant for the Minnesota Budget Project in 2009.
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