On Thursday afternoon (June 18, 2009), Tom Hanson, Commissioner of Minnesota Management and Budget (MMB), presented the Governor’s unallotment plan to the Legislative Advisory Committee (LAC). This is a required step in the unallotment process. Legislators were prepared with plenty of questions…and lots of challenges (you can watch the video online). But remember, the LAC does not have any authority to reject or change the Governor’s unallotment decisions.
Here are a few of the more informative issues that were discussed:
How many job losses will result from proposed unallotments? Jim Schowalter, the state budget director, estimates that the Governor’s unallotment proposal will result in the loss of about 3,100 jobs in the public and private sector (this estimate assumes the shift in education spending will not impact any jobs). Legislators felt those numbers underestimate the impact.
Will these unallotments jeopardize any federal dollars? After some confusion, Pawlenty’s representatives acknowledged that the state will lose some federal funding by reducing state spending on Medical Assistance (MA) programs. The federal government normally matches every dollar in state MA spending with a dollar in federal funding. The federal stimulus package increased that “matching rate” to $1.50 in federal dollars for every state dollar. Representative Huntley listed more than a dozen items in the Governor’s unallotment proposal that would reduce state MA spending, resulting in a loss of these federal matching funds. Commissioner Hanson said they attempted to minimize any loss of federal dollars.
Does the Governor have the authority to enact the school aid payment shift? The $1.8 billion proposal to shift aid payments to schools really has two components – a payment deferral ($1.2 billion) and a change in when property tax receipts are recognized ($600 million). Pogemiller strongly asserted that the Governor does not have the authority to enact the property tax recogniztion component of his plan, leaving a $600 million gap in his unallotment proposal. Pogemiller threatened legal action if the Governor continued to pursue this part of his unallotment plan.
Senator Pogemiller and other legislators also argued that while the Governor may have the authority to carry out the delay in payments to school districts (the $1.2 billion part), he does not have the authority to pay the shift back to schools in the future. So, he argued, the Governor’s proposed school payment shift is really a $1.2 billion cut to school districts unless the legislature authorizes the payment to schools in the future. However, pointed out Pogemiller, since the Governor vetoed the tax bill, there will be no additional revenue available to make schools whole again.
Commissioner Hanson and the staff from the Department of Education insisted that the Governor has the necessary authority to carry out everything he proposes.
What is the size of the deficit facing the state in FY 2012-13? This answer has several layers. MMB reported that the state’s budget deficit after unallotment is projected to be $3.1 billion in FY 2012-13. But then there are several factors which could further increase that deficit:
- If General Assistance Medical Care (GAMC), which the Governor line-item vetoed, comes back at current law levels, that would add nearly $900 million to the deficit. This could happen because the program automatically comes back in FY 2012-13 because the eligibility language is still in statute (the Governor disputes this interpretation) or because the legislature reenacts the program. The legislature might also make some reforms to the program, which could reduce the cost to $400 million.
- If the school payment shift is “bought back,” that would add an additional $1.8 billion to the deficit.
- If the impact of inflation is included, that would add an additional $1.4 billion to the deficit.
Altogether, Senate Fiscal Staff estimated that the state’s budget deficit could grow to $7.3 billion in FY 2012-13.
Does that sound like a lot? Well, remember that the FY 2010-11 deficit is being resolved largely through the use of one-time measures. We started with a $6.4 billion deficit – then used $2.5 billion in one-time federal stimulus resources and $2.7 in one-time unallotment measures. That adds up to about 80% in one-time fixes (plus the legislature also included some one-time measures in the bills they passed that aren’t included in this calculation).
Is the Governor making policy changes in health and human services? Senator Berglin raised several questions about the Governor’s unallotment proposal:
- She does not believe the Governor can decide to pay for Transitional MinnesotaCare out of the Health Care Access Fund instead of the general fund. She believes the Governor’s unallotment proposal would effectively end this program.
- She also questioned whether the Governor had the authority to make policy changes, like limiting the number of hours Personal Care Attendants can work in a month or changing asset limit policies in health care programs.
- Senator Berglin also raised questions about the consequences of some of the Governor’s unallotment proposals, like whether any group residential housing facilities will be forced to close or whether thousands of very low-income people with disabilities will be forced into homelessness before they can access emergency assistance.
The Governor’s representatives remained firm throughout the hearing that the Governor is not exceeding his unallotment authority and defended the various components of his proposal. The Legislative Advisory Commission plans to meet again in the next week or two to ask additional questions.