How the state used the federal stimulus dollars

During session we blogged about the important role one-time federal stimulus dollars (courtesy of the American Recovery and Reinvestment Act) played in solving the state’s budget deficit. Now that the session is over, we can start to account for how the state used the federal money.

There were essentially two large pots of money available:

1. Fiscal stabilization funds. Most of the $816 million in fiscal stabilization funds was used to backfill cuts in state funding in K-12 and higher education. House Fiscal wrote up a nice summary of the federal guidelines for using these funds and the final decisions made by the Governor and legislature. Here’s the allocation:

  • $31 million was allocated to the University of Minnesota and the Minnesota State Colleges and Universities to replace the FY 2009 funding unalloted by the Governor in December 2008.
  • $138 million was allocated to higher education in FY 2010 to partially backfill cuts in state funding (the result was a $60 million net reduction in funding for higher education).
  • $500 million was allocated to E-12 education in FY 2010 to backfill cuts in state funding (the result was no net change in funding for E-12 education).
  • $110 million was allocated to health and human services to pay for state operated services, which are services for people with mental illness, developmental disabilities, chemical dependency, and traumatic brain injury.
  • $38 million was allocated to public safety to backfill cuts in state funding for the Department of Corrections.

2. Federal Medicaid matching funds increase. The state is eligible for approximately $1.8 billion (to be disbursed over three years on a quarterly basis) from the federal government in the form of an increase in the federal contribution for Medicaid costs. Normally Minnesota pays 50% of Medicaid costs and the federal government matches at 50%. Under the federal stimulus plan, the federal matching rate temporarily rises to about 60%, allowing Minnesota’s share to fall to about 40%. However, the exact amount of federal dollars Minnesota will receive is not clear because the state recently cut some Medicaid spending, thereby forfeiting some of the federal matching funds.

Other funding streams: There are a lot of small pots of one-time federal economic recovery money that the state can request – for everything from senior nutrition programs to highway repair. Minnesota Management and Budget has posted at least a partial three page list of federal funds requested by state agencies.

Warning: Remember, these federal resources are temporary and will do nothing to sop up the red ink of future projected deficits. Currently, estimates for the budget deficit awaiting us in the FY 2012-13 biennium range from $3.1 billion to $7.3 billion (read our blog entry on why there’s some dispute over the number). We’ll get a more definitive number in early December.

-Katherine Blauvelt and Christina Wessel

About Katherine Blauvelt

Katherine Blauvelt served as the Minnesota Budget Project’s policy analyst from 2007 to 2009.
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