House budget targets devote 2/3 of surplus to taxes, transportation

The Minnesota House of Representatives’ budget targets tell us how they propose to allocate the state’s projected $329 million surplus for FY 2018-19. The House targets put the bulk of the surplus toward tax reductions and transportation.

The targets are an important milestone in the budgeting process. They set the size of the House’s omnibus budget bills. Last year, policymakers passed the state’s FY 2018-19 two-year budget, so any budget decisions this year would be adjustments to that budget.

House General Fund Targets (net) FY 2018-19
Tax Cuts and Aids to Local Governments $107 million
Transportation $101 million
Education $30 million
Jobs and Energy $15 million
Health and Human Services $10 million
Capital Investment $8.9 million
Public Safety $7.1 million
Higher Education $5 million
Environment and Natural Resources $750,000
Agriculture $250,000
State Government -$7 million
Other Bills $51 million
Net Changes $329 million

Taxes get the largest piece of the projected surplus. The tax bill needs to respond to the federal tax bill passed in December. This was a sweeping and complicated piece of legislation, and since Minnesota’s individual income tax and corporate tax systems use federal tax law as their starting point, Minnesota policymakers have to decide how to respond to those federal changes. We have urged policymakers to honor Minnesota values, including treating taxpayers fairly, continuing to practice fiscal responsibility, and maintaining the revenues to sustainably fund the state’s priorities. Taking targeted action that prioritizes low- and middle-income taxpayers should be the goal.

Transportation is the second largest funding priority for the surplus. Traditionally, transportation has relied more on dedicated funding sources, rather than competing with schools, health care, and other priorities for general fund dollars.

Since the targets allocate most of the projected surplus toward taxes and transportation, they leave little room for investments in other areas of the budget. The House indicated that some investments, like those addressing the opioid crisis and funding for vulnerable adults, could be included in the “Other Bills” category.

The House budget also would accelerate a $75 million transfer to Minnesota’s budget reserve from unused funds that had been dedicated to the Premium Subsidy Account. Every year, Minnesota Management and Budget sets a goal for the budget reserve that would get the state through most recessions. This addition would get our state a little closer to that goal.

The Senate has not released targets, although they have been developing their supplemental budget bill. We’ll be watching closely as the House, Senate, and Governor Mark Dayton put together the final budget in these final weeks of the 2018 Legislative Session.

-Clark Goldenrod

About Clark Goldenrod

Clark Goldenrod is the Minnesota Budget Project's senior policy analyst.
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