Policymakers put budget together, but it’s not a done deal

Legislators ended this session with a flurry of late-night conference committees and marathon floor sessions. “Global targets” were established just a few days before session ended, so legislators raced against the clock Monday night to pass budget bills for FY 2016-17. However, policymakers are expected to come back for a special session.

That’s because Governor Mark Dayton has said he will veto the E-12 Education bill, as he believes it does not provide adequate funding for several of his priorities. As a result, a special session is needed to set the education budget before the new budget cycle starts on July 1.

The House, Senate and governor were unable to come to an agreement on two major budget bills, tax and transportation, which resulted in no tax bill and a small, relatively status quo transportation bill. The status of these bills will not trigger a special session.

FY 2016-17 General Fund Budget Priorities
 Budget Bill Governor House Senate Conference Agreement
E-12 Education $695 million $158 million $365 million $400 million
Higher Education $283 million $57 million $205 million $166 million
Health and Human Services $341 million -$1.2 billion $340 million -$302 million
Jobs and Economic Development $53 million -$11 million $66 million  $30 million
Environment and Agriculture $29 million $8.8 million -$9.4 million -$23 million
State Government and Veterans $50 million -$67 million $40 million $11 million
Transportation and Public Safety $30 million -$108 million $30 million $30 million 
Judiciary and Public Safety $149 million $82 million $117 million $111 million
Tax Cuts and Aids to Local Governments $136 million $2.3 billion $461 million $0 

The final budget bills include some provisions to expand prosperity to more Minnesotans by making higher education more affordable and increasing access to affordable child care. However, there were also many lost opportunities. For example, policymakers failed to expand earned sick time to more Minnesota workers, to allow all Minnesotans to have the economic opportunities that come with a driver’s license regardless of their immigration status, or to expand the Child and Dependent Care Tax Credit or the Working Family Credit.

The E-12 Education bill increases funding for schools through the basic student formula by 1.5 percent in FY 2016 and 2.0 percent in FY 2017, an increase of $87 and $118 per student each year. It also includes $31 million for early learning scholarships and $31 million for school readiness. As mentioned above, Dayton plans to veto this bill.

In Higher Education, policymakers agreed to keep the cost of tuition down at the University of Minnesota and Minnesota State Colleges and Universities, but the funding is not enough to fully freeze tuition. The final bill also improves financial aid through the Minnesota State Grant program and reduces the waiting list for American Indian scholarships.

In the Health and Human Services budget, policymakers cut general fund appropriations by $302 million, despite the state’s projected $1.9 billion surplus. The budget rejects the House proposal to eliminate MinnesotaCare, which provides health insurance for about 100,000 working Minnesotans, but it does raise health care costs for MinnesotaCare participants. Policymakers included $10 million for more families to have affordable child care through Basic Sliding Fee Child Care Assistance, which had a waiting list of 4,400 families as of March. The bill also includes a number of investments in mental health, nursing homes, and services for children and youth.

An Economic Development and Housing budget bill passed minutes before the end of session largely includes only base funding for affordable housing and economic development. It does not include a harmful “local interference” measure proposed by the House, which would have prevented local governments from setting higher wage and job quality standards than state law.

The governor, House and Senate had all proposed substantial new money for Transportation, but could not bridge their differences about how to pay for them – by increasing existing dedicated funding sources (such as the gas tax) or using current general resources. A Senate proposal to expand access to driver’s licenses for Minnesotans regardless of immigration status was not included. Having a driver’s license can open a door to greater economic opportunity for immigrants, which also has a positive ripple effect on the state’s economy and ensures the state’s roads are safer by requiring everyone to take a driving test before they’re behind the wheel.

The lack of a Tax bill means that policymakers did not move forward the House’s proposal for more than $2 billion in tax cuts, several of which grew larger over time, such as eliminating the statewide property tax paid by businesses and cabins, fully exempting Social Security income and deeply cutting the estate tax. Several of the House tax proposals also would have reversed the state’s recent progress in making the tax system more equitable, so it’s a good thing they were not enacted into law. The flip side is that the state also did not move forward with more positive tax proposals focused on the needs of lower- and middle-income Minnesotans, such as expanding the Child and Dependent Care Tax Credit or the Working Family Credit. Policymakers linked the tax and transportation issues together in end-of-session negotiations, and these issues may well remain intertwined into the future.

The Legacy budget bill, which is an important funding source for arts and cultural heritage and environmental organizations, was not passed as well. However, the governor has said he would like to address this in a special session.

With a projected $1.9 billion surplus for FY 2016-17, policymakers had substantial opportunity to invest in more Minnesotans sharing in our state’s economic success. Policymakers made some progress in making education more affordable and increasing access to affordable child care. However, they also missed many opportunities to invest in Minnesotans, such as failing to expand access to driver’s licenses or the Child and Dependent Care Tax Credit or Working Family Credit.

-Clark Biegler

About Clark Biegler

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