Governor, House and Senate move forward with budget framework in place

As the 2013 Legislative Session quickly draws to a close, the final pieces of the budget are coming into place. Over the weekend, Governor Dayton and House and Senate leaders agreed to a budget framework for the upcoming FY 2014-15 biennium that raises significant revenues to close the state’s budget deficit and make critical investments in the building blocks of our future economic success.

The framework gives the conference committees their budget targets needed to wrap up their work developing the FY 2014-15 budget. The table below compares the Governor, House and Senate targets with the budget agreement.

Education continues to be a high priority. The budget framework includes an additional $475 million for E-12 education and $250 million for higher education in FY 2014-15. Leaders also agreed to fully repay the school funding shifts in the FY 2014-15 biennium.

One of the more significant changes in the budget framework comes in health and human services, where the final agreement includes a $50 million reduction in spending for FY 2014-15. While this is a significant improvement from the targets proposed by the House and Senate (cuts of $150 million and $153 million respectively), it is still far from the Governor’s proposal to increase investments in our vulnerable families and children by $124 million in the next biennium.

The budget framework also outlines some of the parameters of a tax package in order to address the state’s budget deficit and fund these investments. The budget agreement calls for a net $1.65 billion increase in revenues in FY 2014-15. The framework outlines some of the major components, with many details to be resolved this week by the tax conference committee based on ideas in the Governor’s tax bill, Senate omnibus tax bill and House omnibus tax bill. Some of the reported tax components of the budget agreement include:

  • An income tax increase on taxable income above $250,000 for married couples and $150,000 for single filers. The final rate and amount raised are still to be determined.
  • $400 million in property tax reductions. The conference committee will determine how this will be allocated among increased funding to cities, counties and townships; property tax refunds for homeowners and renters; and education property tax reductions.
  • An increase in cigarette taxes, with the rate and amount to be determined by the conference committee.
  • Corporate tax changes.
  • A temporary income tax surcharge to fully reverse the school funding shifts during the FY 2014-15 biennium. The rate and amount of the surcharge will be determined later in the year after the 2013 fiscal year is concluded and any positive balance is applied to reversing the school shift.

The Senate tax conferees are putting together a revenue-neutral sales tax reform proposal, which is not expected to include a sales tax on clothes or other consumer purchases. The tax conference committee will also determine what role, if any, alcohol taxes, estate taxes and the statewide business tax will play in the final tax bill. The conference committee is expected to work throughout the week to craft a bill that meets the budget framework’s parameters and makes the state’s tax system less regressive and invests in our future.

-Minnesota Budget Project staff

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