What’s at stake in final budget negotiations: three different approaches to Minnesota’s future

As policymakers work to set the budget for the upcoming FY 2016-17 biennium, they bring very different visions to the table.

Governor Mark Dayton proposes to use much of the state’s projected $1.9 billion surplus for expanded educational opportunities, improving transportation, reducing the cost of college and other investments that expand economic success in Minnesota. The Senate proposes investments in education and health and human services, and a tax bill that focuses on reversing accounting shifts and boosting funding for local governments. The House’s tax bill includes large tax cuts and is even bigger than the surplus, and as a result, the House has the smallest targets for their budget bills. While they provide new spending in areas such as nursing homes, the House also makes dramatic cuts in affordable health care.

Soon, “global targets” will be set that determine the size of the final tax and budget bills. Here’s a recap of where things stand.

FY 2016-17 General Fund Budget Priorities
  Governor Senate House
E-12 Education $695 million $365 million $158 million
Health and Human Services $341 million $340 million -$1.2 billion
Higher Education $283 million $205 million $57 million
Transportation and Public Safety $179 million $144 million -$26 million
Environment, Agriculture and Economic Development $84 million $57 million -$2.2 million
State Department and Veterans $64 million $40 million -$67 million
Budget Reserve $0 $250 million $150 million
Tax Cuts and Aids to Local Governments $138 million $458 million $2.3 billion

Dayton proposes to invest in schools, affordable college tuition, a safe and modern transportation system and other building blocks of a prosperous state. He largely focuses on Minnesota’s students by expanding free pre-kindergarten, freezing tuition at the University of Minnesota and Minnesota State Colleges and Universities (MnSCU), and improving financial aid. More Minnesota families would also have affordable child care through Basic Sliding Fee Child Care Assistance. Dayton’s tax proposal continues to prioritize a sustainable tax system and meeting the needs of Minnesota families, and would expand the Child and Dependent Care Tax Credit and Working Family Credit. Dayton also proposes a broad plan to repair and improve the state’s transportation system, which includes several investments in transit in both the Twin Cities and Greater Minnesota. This plan is paid for through a package of revenue-raisers, including the gas tax and local sales taxes.

The Senate prioritizes investments in education and health and human services, and building the budget reserve. The Senate’s budget bills include many of the governor’s priorities to expand economic opportunity, including tuition relief at public colleges and universities, and reducing the waiting list for Basic Sliding Fee. The Senate proposes a larger tax bill than the governor, but at $458 million, their tax bill is only one-fifth the size of the House’s. The Senate tax bill puts a priority on reversing payment timing shifts and increasing funding to cities, counties and townships, as well as a tax credit for employers who hire veterans, an expansion of the K-12 Education Credit and a college savings tax credit. The Senate transportation bill includes similar priorities and funding mechanisms as the governor’s budget. The Senate also devotes $250 million to the state’s budget reserve.

The House takes a very different approach. The House’s tax bill includes large tax cuts that grow over time and includes provisions that would reverse the state’s recent progress towards a fairer tax system. Because the tax bill is larger than the state’s projected surplus, it is paid for in part by cuts in health care, affordable housing and other critical services. The House targets for other budget bills are significantly smaller than the Senate’s. Their health and human services bill in particular raises concerns. While it includes increases in a few areas, such as nursing homes, the bill also eliminates MinnesotaCare and dramatically increases health care costs for more than 100,000 working Minnesotans. The House transportation bill is smaller than the governor’s and Senate proposals, and relies on dedicating existing funding sources that currently go the general fund. This puts transportation funding in greater competition with funding for schools, health care, public safety and other areas of the budget. The House also devotes $150 million to the state’s budget reserve.

There is still work to do so that all Minnesotans have the chance to share in the state’s prosperity. As policymakers create the next two-year budget, they should prioritize policies that meet that goal, such as funding Basic Sliding Fee Child Care Assistance, maintaining affordable health care through MinnesotaCare and increasing access to education and training opportunities that build Minnesota’s workforce. Policymakers should also keep in mind the role that transportation plays in access to jobs and economic opportunity, and make funding and investment choices that meet the transportation needs of low-income persons and economically struggling communities. Policymakers should keep tax cuts limited and sustainable, and continue to make progress on a tax system that is more equitable through expanding the Working Family Credit and Child and Dependent Care Credit.

-Clark Biegler

About Clark Biegler

Clark Biegler is the Minnesota Budget Project's policy analyst.
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