Governor Dayton’s FY 2018-19 budget prioritizes investments in broader prosperity

Clark Goldenrod
Jan 25, 2017

In his release of his FY 2018-19 budget proposal Tuesday, Governor Mark Dayton outlined his priorities as an “Opportunity Agenda” that would build an economy that works for everyone across the state.

We’ll be looking more closely at the budget proposal in coming days, but today touch on some of the pieces that most caught our attention, including initiatives that we think build a broad, more durable prosperity.

Tax cuts focused on everyday Minnesotans

Two centerpieces of Dayton’s tax proposal are the Working Family Tax Credit and the Child and Dependent Care Tax Credit. These two tax credits are targeted to Minnesotans who, despite working hard, struggle to pay for child care, education and training, reliable transportation and other things they need to succeed in the workplace.

Specifically, the governor’s budget would:

  • Expand the Working Family Credit so working people can better support themselves and their families. The proposal would boost the size of the credit and make more Minnesotans eligible, including younger workers who currently are excluded. Over 367,000 families and workers across the state would receive an additional $94 million in tax credits over the two-year budget cycle.
  • Update the Child and Dependent Care Tax Credit to keep up with the rising cost of child care and allow more working parents to qualify. Under this proposal, 75,000 Minnesota families would receive an average $379 tax benefit.

Expanded access to health care

Under Dayton’s plan, access to affordable health insurance through MinnesotaCare would be expanded. MinnesotaCare is currently available to families earning up to 200 percent of the federal poverty guidelines. Dayton’s proposal would make MinnesotaCare an option for all Minnesotans who do not have health insurance coverage through their employer or other public health insurance. The cost for Minnesota to expand this health coverage would be covered by premiums paid by the new MinnesotaCare participants. The state’s only expenses would be $13 million in start-up costs.

The proposal makes two important changes to the way Minnesota finances affordable health insurance:

  • An additional $999 million would be available for affordable health care in FY 2020-21 due to the preservation of an important funding source. The proposal cancels the planned sunset of the provider tax on December 31, 2019. In the face of great uncertainty about future federal health care policy, cancelling the sunset makes sense. The revenue supplied by the provider tax will be as important as ever in order to ensure that more Minnesotans are able to benefit from our world-class health care system.
  • $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 help fund affordable health care through Medical Assistance. These transfers would leave the Health Care Access Fund with a $323 million surplus in FY 2021.

Improved child care assistance

Dayton proposes important improvements to the Child Care Assistance Program (CCAP), which includes Basic Sliding Fee Child Care Assistance. His budget includes a long-overdue increase in the reimbursement rates paid to child care providers through CCAP, and would also make CCAP work better for parents, children and child care providers. In total, Dayton proposes $68 million in FY 2018-19 and $77 million in FY 2020-21 in new CCAP investments. This is an important investment that policymakers should build on by also committing additional resources so more families can participate in Basic Sliding Fee, which currently has about 5,000 families on a waiting list.

Further investments in racial and geographic equity

The governor’s budget proposal also includes investments in education and economic development that address racial and geographic equity issues, including: $62 million to make college more affordable for students by improving financial aid through the State Grant Program, and $10 million for various initiatives to eliminate housing disparities.

The big takeaways

The positive balances projected in the state’s recent forecast reflects the state’s ongoing economic recovery and means there are resources available for strategic investments to bring about broader prosperity. At the same time, there is a great deal of uncertainty about potential large scale federal changes and their impact on the state and our residents.

Given the uncertainty of these times, we’ve argued for the importance of maintaining the state’s rainy day fund. Dayton uses $312 million from the budget reserve to subsidize health insurance premiums, which we’ll talk more about in another blog.

Stay tuned for our upcoming in-depth dives into some of the governor’s proposals. In the meantime, you can download the governor’s budget materials at Minnesota Management and Budget’s website.

This blog is part of a series on Governor Mark Dayton’s FY 2018-19 budget proposal, including his HHS budget and his tax priorities.