Senate targets prioritize sustainable tax changes, broader opportunity

The Minnesota Senate released its budget targets on Wednesday, which describe how they propose using the state’s projected surplus to make changes to the state’s two-year budget passed last year. The Senate targets allocate $300 million of the surplus to taxes, $489 million to net general fund spending, and leave $111 million unallocated.

In contrast, the Minnesota House of Representatives’ targets released last week allocated the vast majority of the surplus to taxes and transportation (but did not specify how that figure would be divided between the two areas), and allocated only $2 million of the surplus to new investments in other areas of the budget.

Senate General Fund Targets (Net)
Tax Cuts and Aids to Local Governments $300 million
Equity $91 million
Broadband $85 million
Natural Resources, Economic Development and Agriculture $60 million
E-12 Education $48 million
Higher Education $48 million
Judiciary and Public Safety $45 million
Health and Human Services $43 million
Transportation and Public Safety $32 million
State Departments and Veterans $30 million
Environment and Energy $8 million
Net Changes (FY 2016-17)
$789 million

Minnesota has a projected $900 million surplus for the remainder of the current FY 2016-17 biennium and $1.2 billion for FY 2018-19. In a press conference, Senate DFL leadership emphasized much of the new spending in this biennium will be “one-time” and not continue on into the next biennium in order to keep in line with the more limited surplus available in FY 2018-19.

The Senate targets indicate that addressing equity issues and the lack of broadband in Greater Minnesota are priorities for the Senate this session. For broadband, the Senate targets allocated $85 million compared to the House’s $13 million in FY 2017.

While the net general fund target for E-12 education is $48 million, the Senate targets note there will be a total of $101 million in new education spending. This is made possible through a loan refinancing option for some school districts, included in both the House and Senate E-12 Education targets, which raises additional state resources.

The Senate targets do not include bonding, and some of the $111 million that is currently unallocated will be directed toward capital projects.

The targets are an important milestone in the budgeting process, and they set the size of the budget provisions that the Senate finance divisions are starting to put together. The Senate will combine most of the finance provisions – except for taxes, transportation and capital investment – into one supplemental budget bill next week.

Taxes and transportation will take a little different path. These are the two areas where little action was taken in 2015, and where reconvened conference committees will negotiate based on last year’s bills plus some new items raised this year.

As policymakers decide how to allocate the state’s current surplus, we’ve argued they should make sustainable tax reductions focused on working families and invest in broader economic opportunity. We will be watching closely as the details are filled in, but the Senate targets certainly create the opportunity to reach those goals.

-Clark Biegler

About Clark Biegler

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