With an eye on learning from the past and preparing for the future, Senate leadership today released their budget targets, charting a much different path from the House’s proposal earlier this week.
The Senate proposes a strong focus on education and more limited tax cuts, while the House suggested severe cuts to Health and Human Services and an unsustainable tax target.
Taxes: Senate leadership has proposed a $460 million tax target, a portion of which will focus on property taxes. About half will be used to reverse accounting measures used in the 1980s to balance the budget. This is far less than the House’s $2.3 billion tax target, and seems to prioritize not going too far with large permanent tax cuts. The history on this is clear: when policymakers do too much tax cutting in good times, it is harder to respond when the next economic downturn comes along.
In addition to the size of tax changes, the other key issue is who will benefit. We urge the Senate to continue to make our tax system more fair, as it is still the case that the highest-income Minnesotans pay a smaller share of their income in state and local taxes than other Minnesotans.
New Spending: Most of the Senate’s new spending is focused on education. Senate leadership proposes $350 million in additional funding for E-12 Education and $205 million for Higher Education. In comparison, the House targets are substantially smaller – $157 million in E-12 Education and $53 million for Higher Education.
Under the Senate proposal, Health and Human Services will also see a boost of $341 million. In this area, we see greatly different visions between the House and Senate. While the House has proposed a $1.1 billion cut to Health and Human Services compared to base funding and discussed substantial changes to health care, the Senate has emphasized that working Minnesotans should be able to keep their affordable health insurance through MinnesotaCare.
Budget Reserve: Both the House and Senate targets show a commitment to building our state’s resources for the next economic downturn. The Senate targets include a $250 million addition to the state’s budget reserve. This would bring the state’s “rainy day” funds to $1.6 billion of the suggested $2.2 billion target. The House proposal includes $100 million in additional funding for the reserve.
Now that the House and Senate have released the outlines of their budget proposals, we can expect to see finance bills shaping up. Senate Majority Leader Tom Bakk indicated that we will see the bills on the House and Senate floors in mid-April, which is earlier than the previously set “third committee deadline” of April 24.