Governor Dayton’s FY 2018-19 Budget: HHS investments focus on Minnesota’s most vulnerable, preserves provider tax

Governor Mark Dayton’s budget makes important new investments in health and human services, largely centered on health care and families with children. Dayton also proposes preserving a crucial source of revenue – the provider tax – and reallocating resources from the Health Care Access Fund to the state’s general fund in order to pay for Medical Assistance. As a result, while increasing the state’s investment in critical services for some of our most vulnerable neighbors, the governor’s budget would actually decrease general fund spending on Health and Human Services by $400 million in FY 2018-19 and $689 million in FY 2020-21.

Dayton’s budget cancels the planned sunset of the provider tax. By preserving this important source of revenue, $999 million would be maintained in FY 2020-21 to invest in affordable health care in Minnesota. The provider tax is a 2 percent tax on most health care services. It has been around for more than two decades, but policymakers wrote a law in 2011 that would repeal the tax on December 31, 2019.

Cancelling the sunset makes sense, especially given the uncertainty in the health care market. The revenue supplied by the provider tax is as important as ever in order to ensure that Minnesotans are able to benefit from our world-class health care system.

Dayton’s plan also includes several other significant changes to health care policy:

  • MinnesotaCare would become an option for all Minnesotans who do not have health insurance coverage through their employer or other public health insurance. MinnesotaCare is health insurance that is currently available to Minnesotans earning 200 percent of the federal poverty guidelines or less ($48,600 for a family of four). It features sliding-scale monthly premiums and affordable co-payments and other out-of-pocket costs. Because the state’s costs for an expanded MinnesotaCare would mostly be covered by federal funding and premiums and co-payments paid by enrollees, the state’s only expenses would be $13 million in start-up costs.
  • $716 million in FY 2018-19 and $1.1 billion in FY 2020-21 would be transferred from the Health Care Access Fund to the state’s general fund, where it would cover some of the cost of Medical Assistance. With the preservation of the provider tax, these transfers would leave the Health Care Access Fund with a $323 million surplus in FY 2021.
  • $10 million in FY 2018-19 and $13 million in FY 2020-21 would provide higher reimbursement rates for some mental health and preventative health care services.

Dayton proposes important improvements for the parents, children, and child care providers participating in the Child Care Assistance Program (CCAP), which includes Basic Sliding Fee Child Care Assistance. His budget includes a long-overdue increase in the maximum rates paid to child care providers through CCAP, which would give parents served by CCAP greater access to child care providers. The CCAP proposals would also simplify how CCAP is administered, resulting in a more streamlined program for both families and child care providers. Failing to implement some of these changes could result in decreased federal funding and fewer families served by Basic Sliding Fee.

In total, Dayton proposes $68 million in FY 2018-19 and $77 million in FY 2020-21 in new CCAP investments. Policymakers should build on these important steps by committing additional resources to Basic Sliding Fee so that more families are able to find stable, nurturing care for their children. Basic Sliding Fee currently has about 5,000 families on waiting lists after more than a decade of decreased state funding.

In addition to improving CCAP, Dayton proposes several other investments in children and their families, including:

  • Improvements to the state’s child welfare system and payment rates to adoptive families ($20 million in FY 2018-19 and $49 million in FY 2020-21).
  • An increased investment in home visiting services for pregnant and parenting teens ($31 million in FY 2018-19 and $51 million in FY 2020-21).

Unfortunately, Dayton’s budget for children and families fails to increase the resources provided to Minnesota’s most economically vulnerable families through the Minnesota Family Investment Program (MFIP). The cash assistance provided to families through MFIP has not increased in 31 years, and is just $532 for a family of three. The omission of any increase to this most basic assistance for families who have hit a rough patch is a great disappointment.

-Ben Horowitz

Note: This blog is part of a series on Governor Mark Dayton’s FY 2018-19 budget proposal, including his education budget, his economic development and transportation proposals, and his tax priorities.

About Ben Horowitz

Ben Horowitz is the Minnesota Budget Project's policy advocate.
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