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  • Senate HHS omnibus bill focuses on economic opportunity, health care and vulnerable youth

    by Ben Horowitz | May 06, 2015

    The Senate Health and Human Services omnibus bill (Senate File 1458) uses the committee’s $341 million target to expand access to economic opportunity and mental and physical well-being. It includes $146 million to protect and support the young and $72 million to expand access to health care. The Senate’s new investments are in sharp contrast to the House proposal, which ends affordable health care for more than 100,000 Minnesotans.

    The Senate bill includes two important provisions to help Minnesota families achieve economic success. It includes $19 million in FY 2016-17 to expand access to affordable child care through Basic Sliding Fee Child Care Assistance. Thanks to this proposal, 700 more families in an average month would pay less for child care. Basic Sliding Fee enables parents to get to work and support their families. Their children can thrive in consistent care environments, and employers can more easily find the workers they need. Another $1.6 million would simplify the broader Child Care Assistance Program, making it easier for parents to participate and for providers to serve low-income families.

    The Senate bill also spends $68 million to increase assistance to families through the Minnesota Family Investment Program (MFIP). The bill would increase the maximum cash assistance through MFIP by about $100 per month. For the past 29 years, a family of three has received $532 monthly, which is not enough to cover a family’s basic needs and leaves many Minnesota children living in deep poverty. The MFIP increase builds on solid evidence that boosting family income is an effective way to improve children’s well-being.

    The Senate bill also includes most of Governor Mark Dayton’s proposal for $57 million in FY 2016-17 to improve child protection and to expand Minnesota’s services for homeless and sexually exploited youth. The House does too, although it includes $700,000 less than the Senate for these initiatives.

    On the health care front, the Senate includes $48 million in FY 2016-17 for several initiatives to improve and expand access to mental health services. For example, the Senate plan includes Dayton’s $6.9 million proposal for behavioral health homes. This approach is based on a promising model that improves health outcomes for mental health patients through better care coordination. It also reduces the use of more expensive services, like the emergency room.

    The Senate’s proposal would also provide $15 million in FY 2016-17 to improve access to preventive dental care. The bill increases dental provider rates, starts an outreach effort about preventive dental care and would cover more dental services. Untreated dental problems can escalate into painful, costly trips to the emergency room. The Senate’s dental funding is significantly more than the House or Governor Dayton’s proposals, which devote $4.3 and $10 million, respectively.

    The Senate and House HHS bills contain provisions to make it easier for elderly Minnesotans and people with disabilities to work without losing affordable health care. They both include:

    • $5.3 million to reduce premiums for Medical Assistance for Employed Persons with Disabilities (MA-EPD). MA-EPD has premiums that increase with income. A person with a disability could see their income from working swallowed up by higher medical costs. Lowering premiums would allow more Minnesotans with disabilities to work without risking their medical coverage.
    • Funding to decrease the Medical Assistance “spend down” for elderly Minnesotans and people with disabilities. Medical Assistance spend down allows coverage for people with high medical costs whose incomes are higher than the eligibility limits. If a senior or adult with a disability earns more than $973 per month, Medical Assistance kicks in once their medical bills reduce their income below the spend down amount of $730, or 75 percent of the federal poverty guideline. The Senate proposes $3.5 million beginning in FY 2017 and $18 million in FY 2018-19 to gradually raise the limit to 95 percent of the poverty guideline. The House would spend slightly less in FY 2017 and change the spend down to 80 percent of the poverty guideline.

    Senate File 1458 protects and expands affordable health care, increases access to economic opportunities and strengthens important protections for vulnerable young Minnesotans. The bill also maintains our existing efforts to make Minnesota a place where a run of bad luck does not make it harder to stay healthy or impossible to make ends meet.

    -Ben Horowitz

  • Senate transportation omnibus bill expands access to driver’s licenses

    by Clark Biegler | May 05, 2015

    The Senate transportation omnibus budget bill (House File 4) would expand economic opportunity for Minnesotans by allowing them to apply for a driver’s license, regardless of immigration status.

    For many Minnesotans, the daily activities we do to support our families, like getting to work safely, dropping children off at school, or buying groceries, requires driving. But too many of our neighbors cannot apply for a driver’s license.

    Having a driver’s license can open a door to greater economic opportunity for immigrants that has a positive ripple effect on the state’s economy. Workers are able to get to their jobs safely and reliably, and can get to more job opportunities. With a large share of the population aging out of the workforce, Minnesota can’t afford to leave qualified workers on the sidelines because they are unable to get to work. As these Minnesotans are able to increase their earnings, that also creates a boost in consumer spending that’s good for our state economy. This provision also keeps our roads safer by requiring everyone to take a driving test before they’re behind the wheel.

    The provision in the Senate transportation omnibus bill would allow immigrants to show a valid passport accompanied by a birth certificate as acceptable identification to apply for a driver’s license.

    The House and Senate transportation bills are being discussed in a conference committee where their differences will be worked out. Policymakers should include policies in their final transportation budget that expand economic opportunity, and increasing access to driver’s licenses is one policy that meets that criteria.

    -Clark Biegler

  • Despite surplus, House HHS budget bill cuts affordable health coverage, cancels long-term savings

    by Ben Horowitz | May 05, 2015

    The House Health and Human Services omnibus bill (House File 1638) makes more than $1 billion in cuts in FY 2016-17 to vital services that help Minnesotans meet their most basic needs. The bill would repeal MinnesotaCare, eliminating a time-tested affordable health care option for more than 100,000 working Minnesotans. There is a lot to talk about in the 372-page legislation, but two themes are particularly troubling: the House bill would greatly decrease investments in preventive health efforts with long-term payoffs, and the bill includes several poorly defined savings initiatives.

    The bill’s most alarming provision is its repeal of MinnesotaCare. The proposal would raise health care costs to unaffordable levels for working Minnesotans earning less than 200 percent of the federal poverty guidelines ($23,540 for a single individual). With the repeal, these households would purchase insurance through MNsure.

    Our rough estimate is that an average “silver” health insurance plan on MNsure would cost these working Minnesotans more than $100 per month by FY 2017, even with federal and state premium assistance accounted for. This is double the maximum premium for MinnesotaCare. That means many of these households could only afford a bronze plan, and would face higher out-of-pocket costs when they get sick or injured.

    MinnesotaCare’s repeal operates at cross purposes to the bill’s $27 million in FY 2016-17 for mental health initiatives and $4.3 million to expand access to dental services. That’s because basic MNsure plans lack the level of mental health coverage found in MinnesotaCare; unlike MinnesotaCare, many MNsure plans lack dental coverage entirely. For the Minnesotans losing MinnesotaCare, this would mean toothaches are more likely to turn into a more serious issue and a costly visit to the emergency room. People struggling with mental health issues would be less likely to receive the counseling or medication they need. These new state investments would not do much to offset the big loss in coverage.

    The bill also cuts $51 million from two long-term, evidence-based savings initiatives in FY 2016-17 by:

    • Eliminating the state’s funding for the State Health Improvement Program (SHIP), short-circuiting efforts to reduce obesity and tobacco use, two big drivers of health care costs. SHIP grants mostly go to fund locally-based initiatives in Greater Minnesota. Cutting SHIP threatens our status as a national leader on obesity reduction, and risks a reversal of recent declines in tobacco use.
    • Reducing low-income parents’ access to Nurse Home Visiting. Home visiting prevents future costs in the education, social service and justice systems by connecting at-risk families with professionals who help parents create nurturing environments.

    Beyond these cuts to specific services and initiatives, the House bill relies on $637 million in FY 2016-17 from broader savings proposals to meet their target. These include:

    • $300 million from contracting with a private vendor for an eligibility and provider audit of Medical Assistance and other programs in the Department of Human Services. Similar efforts in other states failed to generate their promised savings and resulted in lots of eligible people losing coverage. Fiscal notes released on a similar approach predicted it would yield only $17 million in savings in FY 2016-17.
    • $132 million from undefined administrative cuts to the Departments of Human Services and Health, and for the managed care organizations that administer public health care programs. Because these cuts are not specifically defined, we can not know difficulties they may create for Minnesotans’ ability to access health care and other services.
    • $135 million from delaying payments to health care managed care organizations.
    • $70 million in reduced payments to health care providers.

    The House bill includes $382 million in new general fund appropriations for FY 2016-17, including the aforementioned mental and dental health proposals. Examples of expenditures include:

    • $138 million to increase nursing home rates.
    • $52 million to fund child protection reforms and $4.3 million for the Homeless Youth Act and Safe Harbor for Sexually Exploited Youth. Similar initiatives are in Governor Dayton’s budget and the Senate’s proposal.
    • $90 million for a one-time increase in FY 2017 for home- and community-based service workers.
    • $8.7 million for two initiatives making it easier for employed Minnesotans with disabilities and seniors to access affordable health care; the Senate passed similar proposals.

    This new spending is more than offset in a bill that ends affordable health care for 100,000 working Minnesotans and terminates long-term investments in health care and children. The bill also has more than half a billion dollars’ worth of savings that may not materialize. This approach is difficult to justify with a nearly $2 billion surplus.

    -Ben Horowitz

  • House and Senate higher education omnibus bills use different approaches to invest in students

    by Clark Biegler | May 01, 2015

    With rising tuition costs, college is becoming more unaffordable for many Minnesota students. The House and Senate higher education omnibus budget proposals have different strategies for bringing down the cost of a college education and investing in the state’s future workforce.

    Since the start of the recession in 2008, the average tuition at Minnesota’s four-year public colleges and universities increased by $1,700, or about 20 percent, at the same time that state funding for these institutions decreased by 24 percent per student.

    A highly educated workforce has been one of the hallmarks of Minnesota’s economic success. And especially now, with a large share of the population aging out of the workforce, we can’t afford to leave anyone on the sidelines without access to education and training. High tuition costs also can block the path to the good jobs that higher education and training can bring, a path that should be open to all Minnesotans.

    The Senate Plan

    The Senate higher education omnibus budget bill (Senate File 5) provides both targeted financial aid and overall tuition relief at the University of Minnesota and Minnesota State Colleges and Universities (MnSCU) system through $205 million in increased state funding for FY 2016-17.

    The Senate follows Governor Mark Dayton’s lead in increasing financial aid through improvements to the Minnesota State Grant program. As in the governor’s proposal, the Senate increases the maximum amount of financial aid to meet the cost of Minnesota’s public colleges and universities. The grant program also has a living allowance, which the Senate increases to match the federal poverty level. This would help Minnesota students better access all of our state’s public colleges and universities and help students meet their basic needs while in school.

    The Senate also increases American Indian scholarship funding in an effort to reduce the waiting list.

    Another Senate focus is tuition relief. Both the University of Minnesota and MnSCU are directed to minimize increases to tuition with this additional funding.

    The House Plan

    The House takes a less targeted approach with their much smaller proposal of $57 million in FY 2016-17, about one-fourth of what the Senate has proposed. Most of the funding in the House’s higher education omnibus budget bill (House File 845) goes to tuition relief at MnSCU. There is no similar proposal for University of Minnesota students.

    These bills head next to conference committee to sort out their differences. We hope to see the final bill invest in our workforce by taking steps to make higher education affordable for all Minnesotans.

    -Clark Biegler

  • House HHS bill dramatically increases cost of health care for 100,000 working Minnesotans

    by Ben Horowitz | Apr 28, 2015

    More than 100,000 Minnesotans would lose their current health care coverage under Representative Matt Dean’s House Health and Services omnibus bill (House File 1638). The bill repeals MinnesotaCare, which would require Minnesotans to pay more for lower quality coverage. They could either pay much higher premiums, or risk higher deductibles and other out-of-pocket costs.

    Under Dean’s plan, Minnesotans currently qualifying for MinnesotaCare would instead buy insurance through MNsure, our state’s health insurance marketplace. Because these households earn up to 200 percent of the federal poverty guidelines ($23,540 for an individual), they would receive a federal tax credit to lower their monthly premiums. The federal government also pays for lower out-of-pocket costs for participants at this income level who choose a “silver plan.” Silver plans are the second-lowest “metal level” on the exchange, generally charging higher premiums but with lower out-of-pocket costs than bronze plans. But even with federal cost-sharing reductions, the premiums and out-of-pocket costs would be higher than under MinnesotaCare.

    Dean’s plan also involves a Premium Health Care Credit, which is found in the omnibus tax bill. This state credit would further offset monthly premium costs on MNsure. But expenditures on the credit are capped at $50 million in total, and the plan does nothing to reduce out-of-pocket costs.

    A rough estimate shows that the combination of federal tax credits and the Premium Health Care Credit would not be enough to reduce an average silver plan to an affordable price. The impact on specific individuals will differ; however, if the state’s $50 million credit is spread among the Minnesotans currently paying for coverage through MinnesotaCare, it leaves the average monthly premium for a federally-subsidized silver plan for an individual at $107. That’s more than double the current maximum MinnesotaCare premium — and the coverage would also have higher out-of-pocket costs.

    That means many working Minnesotans will likely fall into the “bronze trap.” Because of the unaffordable price of silver plan premiums, many MinnesotaCare households are likely to choose a bronze health insurance plan. They’ll still get the state and federal tax credits, but won’t get the federal cost-sharing reductions. When they get sick or injured, their higher deductibles and co-pays would leave them with much higher medical bills than they would have on MinnesotaCare or under a subsidized silver plan.

    As if high premiums and the bronze trap weren’t enough, the Premium Health Care Credit would create a perplexing new expense at tax time. The Premium Health Care Credit would require health insurers to provide “premium assistance” to participants that results in lower monthly premiums. Then, when participants file their taxes, they will receive the state credit. The bill stipulates that by April 15, participants would be required to pay back their insurer for the entire premium advance.

    This creates a range of problems. Many participants will not have received their tax refund by April 15. Others may find that their tax refunds aren’t enough to cover the entire price of the premium discount they received. These households would face a surprising new springtime expense when the “premium advance” bill comes due.

    MinnesotaCare has provided affordable health insurance for working Minnesotans for two decades. But under Dean’s plan, 100,000 Minnesotans would be left choosing between more expensive monthly premiums or riskier low premium plans with high out-of-pocket costs. Policymakers should reject this plan and maintain Minnesota’s status as a national leader in access to affordable health insurance for working households.

    -Ben Horowitz

  • House tax bill contains ticking time bombs

    by Nan Madden | Apr 23, 2015

    The House omnibus tax bill would take Minnesota in the wrong direction for a number of reasons:

    • It is larger than the projected surplus and is paid for in part through cuts in health care, affordable housing and other critical public services;
    • It grows unsustainably over time, threatening our ability to fund our schools, make college more affordable, and make other investments in our economic future; and
    • It provides large tax cuts for higher-income Minnesotans and business property owners rather than focusing on making the tax system more equitable.

    Let’s take a look in particular at the bill’s “ticking time bombs”: tax cuts that grow dramatically larger over time.

    The House tax bill (House File 848) currently weighs in at $2.3 billion in FY 2016-17 and $3.2 in FY 2018-19. But the true cost goes well beyond that, because the bill includes several tax cuts that cost much more in the future.

    Rough estimates are that the cost of the House tax bill will be over $4 billion when fully in effect. The two largest provisions causing that growth are the elimination of the statewide property tax and expanding the exemption for Social Security benefits.

    Eliminating the statewide property tax occurs over six years, with an estimated cost of $2 billion when fully eliminated. Unlike most property taxes, which fund local government services, the statewide property tax is a state revenue source. It is primarily paid by business properties but also by cabins and seasonal resorts.

    The state already exempts Social Security benefits from the income tax completely for lower-income seniors and partially for everyone else. The House tax bill would exempt all Social Security benefits by 2019 at an estimated cost of $1 billion, and that cost would grow further as the number of Minnesota seniors grows.

    While these tax cuts grow over time, that’s in contrast to the largest tax cut aimed at the middle class, which is temporary and disappears after two years.

    Phasing in a tax cut over five or more years does not lower its cost. It just shifts the full cost outside of the budgeting window. That means that policymakers and the public do not have good information about their full cost to determine whether those tax cuts are sustainable. And putting their full effect years into the future divorces the cost of these tax cuts from the inevitable trade-offs that will have to be made to pay for them – whether that is cutting funding for schools, health care or other critical public services, or raising other taxes.

    The danger of tax cuts that grow dramatically over time isn’t theoretical: one delayed tax provision is contributing to a threat to affordable health care we’re dealing with right now. In 2011, policymakers agreed to repeal the health care provider tax at the end of 2019. The provider tax is one of the primary funding sources for MinnesotaCare, through which thousands of working Minnesotans get affordable health insurance.

    We are among those who have raised concerns that repealing the provider tax without finding replacement funding would undermine MinnesotaCare. This year’s House Health and Human Services omnibus bill would eliminate MinnesotaCare and replace it with an option that would raise health care costs for working Minnesotans considerably. One of the proponents’ primary arguments for this radical change is that MinnesotaCare’s funding is unsustainable, even though that is a problem created in part by the decision made in 2011 to phase out the provider tax.

    In addition to this particular example, we’ve seen what happens on a broader level when the state does too much tax cutting. Large tax cuts passed at the end of the 1990s and 2000s proved to be unsustainable, and were followed by deep cuts in services and a greater reliance on property taxes, double-digit tuition increases and higher fees.

    We shouldn’t go down that road again. Policymakers should work toward a smaller, more sustainable tax bill that continues Minnesota’s recent successes in making the tax system more equitable.

  • Senate proposal extends affordable child care to more Minnesota families

    by Ben Horowitz | Apr 23, 2015

    All year long, policymakers, the public and a diverse group of advocates have been discussing the need to address the high price of child care in Minnesota. We’ve been talking about the reasons to increase funding for Basic Sliding Fee Child Care Assistance. Basic Sliding Fee keeps kids in reliable care environments, makes it easier for parents to get to work or school, and boosts the available labor pool for employers. This is why we were very glad to learn that the Senate Health and Human Services omnibus bill (Senate File 1458), authored by Senator Tony Lourey, increases funding for this flexible, common-sense approach to the high cost of child care.

    The Senate proposal would mean about 700 families in FY 2016-17 and about 800 families in FY 2018-19 could better afford child care in an average month. It does so thanks to an additional $19 million in funding in FY 2016-17 and $24 million in FY 2018-19.

    Lourey’s bill builds on the $12 million in increased funding for Basic Sliding Fee in Governor Mark Dayton’s FY 2016-17 budget. It acknowledges the bipartisan support for Senator Jeff Hayden (Senate File 1199) and Representative Mary Franson’s (House File 1057) proposals to make child care more affordable through Basic Sliding Fee supported by the Kids Can’t Wait Coalition. Most importantly, it recognizes the voices of Minnesotans who spoke to legislators about the missed opportunities and stress caused by high child care costs.

    Senate File 1458 marks a turnaround from a long-term trend of disinvestment from Basic Sliding Fee. State funding for Basic Sliding Fee has declined 44 percent since FY 2003, adjusted for inflation. As a result, about 4,500 fewer families had affordable child care through Basic Sliding Fee in FY 2014 compared to FY 2003, and nearly 5,800 families currently sit on waiting lists throughout the state.
    Graph Minnesota's investment in child care has decreased over time
    In contrast to the Senate proposal, the House Health and Human Services omnibus bill (House File 1638) provides no new funding for Basic Sliding Fee.

    There are many good reasons to applaud the Senate’s action. It would allow hundreds more families to share in our state’s prosperity. Policymakers should adopt the Senate’s approach during the coming conference committee.

    -Ben Horowitz

  • House jobs omnibus bill lowers wages, threatens job quality and cuts affordable housing

    by Clark Biegler | Apr 22, 2015

    Legislators are busy putting together the FY 2016-17 budget, but some of the budget plans coming out do not help build a state of shared opportunity. Minnesotans need jobs with good wages and good benefits, affordable housing, and a strong Unemployment Insurance system for when layoffs happen, but the Minnesota House’s employment and economic development omnibus budget bill (House File 843) includes some bad news for Minnesota workers.

    Among the disappointing elements of the House’s jobs and economic development proposal are:

    • a tip penalty that would reduce wages for some minimum wage workers;
    • a “local interference” provision that would prohibit higher job quality standards at the local level;
    • cuts to affordable housing; and
    • sharp reductions to the state’s Unemployment Insurance fund that threaten the state’s insurance system for unemployed workers.

    The bill sets a lower minimum wage, or tip penalty, for workers who receive $4.00 or more in tips per hour. The minimum wage sets a wage floor among all workers, and for tipped workers provides a level of stability in their incomes. This provision would erode the progress our state made last session when policymakers passed a long overdue raise to the state’s minimum wage so that workers’ wages can catch up and keep up with the cost of living.

    The “local interference” provision in the House bill prevents local governments from setting higher wage and job quality standards than state law. For example, if a city wanted to set a higher minimum wage or expand access to earned sick leave beyond what the state requires, they would be prohibited from doing so.

    Also included in the bill are significant cuts to funding for affordable housing. In FY 2016-17, there’s a $5 million cut to the Challenge Fund, which expands affordable workforce housing in areas of job growth. The bill also imposes new requirements on how the Challenge Fund is allocated between Greater Minnesota and the Twin Cities metro area, potentially limiting the ability of the state to allocate housing funds to areas with the greatest need. The Housing Trust Fund, which increases affordable housing and provides rental assistance, is cut by $2.4 million in FY 2016-17. Family Homeless Prevention Assistance is also cut in FY 2016-17 by $1.3 million.

    The House bill also threatens the ability of the state’s Unemployment Insurance system to pay benefits to jobless workers. Unemployment Insurance replaces a portion of lost wages for workers after they have lost a job through no fault of their own. It also helps keep the state’s economy going in times of high unemployment because it helps jobless workers continue to pay rent, buy groceries and put gas in their cars. To fund this insurance system for our workforce, employers pay an Unemployment Insurance tax. However, the House proposal greatly reduces Unemployment Insurance taxes for employers and caps the size of the fund. These changes are estimated to decrease Unemployment Insurance contributions by $430 million in FY 2016-17.

    Fortunately, it’s not all doom and gloom. The bill would remove a provision in current law that allows a lower minimum wage to be paid to hotel or resort workers under a summer work visa who receive a lodging or food benefit. This provision marks at least one step toward bringing all workers to a more adequate minimum wage.

    The House employment and economic development bill will be up for a vote by the full House today.

    -Clark Biegler

  • Proposal would end affordable health care for more than 100,000 Minnesotans

    by Ben Horowitz | Mar 30, 2015

    On March 10, Representative Matt Dean introduced a bill that would dismantle a path to affordable health care for more than 100,000 Minnesotans. MinnesotaCare is a successful, decades-old health insurance option for working Minnesotans. MinnesotaCare offers these Minnesotans affordable health insurance that meets their health care needs – something they can’t find in the private market. The large, negative budget target given to the House Health and Human Services Committee lends dangerous momentum to this proposal that would have serious consequences across the state.

    Currently, households earning 133 percent to 200 percent of the federal poverty guidelines pay income-based premiums for health insurance through MinnesotaCare. That translates to an annual income of $15,654 to $23,540 for a single individual. Budgets that small are already squeezed to capacity by the demands of basic necessities like transportation, housing and food.

    MinnesotaCare spans the state to serve Minnesotans who may otherwise be unable to find affordable health care:

    • MinnesotaCare covers mental health needs often left out of private plans.
    • Certain legal immigrants are ineligible for Medical Assistance, but can get coverage through MinnesotaCare.
    • Farmers, entrepreneurs and small business employees can rely on MinnesotaCare when affordable health insurance isn’t available through their job.

    House File 1665 would completely repeal MinnesotaCare. People who currently qualify for MinnesotaCare would instead pick an insurance plan from the MNsure exchange. Monthly premiums for some could more than double, according to a handout Dean brought to the bill’s first hearing, though the bill provides an unspecified amount to reduce premiums.

    Dean’s examples demonstrate the harmful costs imposed by his proposal by comparing the exchange’s “silver” plans to current MinnesotaCare coverage. Silver plans are the second-lowest “metal level” on MNsure. Silver plans generally have higher premiums than bronze plans, but may offer lower deductibles and co-pays. Under House File 1665, insurance companies would receive subsidies to lower some out-of-pocket costs for the people formerly covered by MinnesotaCare, but their costs would be higher than under MinnesotaCare.

    Facing higher premiums than under MinnesotaCare, families could fall into the so-called “bronze trap". MinnesotaCare participants facing already-tight budgets may only be able to afford the premiums for bronze plans, which may have lower premiums but higher out-of-pocket costs. The trade-off for lower premiums is that when medical care becomes necessary, the family’s costs will be higher. And when people face higher out-of-pocket costs, they simply delay needed care.

    If something ain’t broke, don’t fix it. Ending MinnesotaCare would mean 100,000 Minnesotans would suddenly be left wondering how they’ll pay for their medication or if they can afford a trip to the doctor when they get ill.

    -Ben Horowitz

  • Senate targets focus on education, more limited tax target

    by Clark Biegler | Mar 27, 2015

    With an eye on learning from the past and preparing for the future, Senate leadership today released their budget targets, charting a much different path from the House’s proposal earlier this week.

    The Senate proposes a strong focus on education and more limited tax cuts, while the House suggested severe cuts to Health and Human Services and an unsustainable tax target.

    Taxes: Senate leadership has proposed a $460 million tax target, a portion of which will focus on property taxes. About half will be used to reverse accounting measures used in the 1980s to balance the budget. This is far less than the House’s $2.3 billion tax target, and seems to prioritize not going too far with large permanent tax cuts. The history on this is clear: when policymakers do too much tax cutting in good times, it is harder to respond when the next economic downturn comes along.

    In addition to the size of tax changes, the other key issue is who will benefit. We urge the Senate to continue to make our tax system more fair, as it is still the case that the highest-income Minnesotans pay a smaller share of their income in state and local taxes than other Minnesotans.

    New Spending: Most of the Senate’s new spending is focused on education. Senate leadership proposes $350 million in additional funding for E-12 Education and $205 million for Higher Education. In comparison, the House targets are substantially smaller – $157 million in E-12 Education and $53 million for Higher Education.

    Under the Senate proposal, Health and Human Services will also see a boost of $341 million. In this area, we see greatly different visions between the House and Senate. While the House has proposed a $1.1 billion cut to Health and Human Services compared to base funding and discussed substantial changes to health care, the Senate has emphasized that working Minnesotans should be able to keep their affordable health insurance through MinnesotaCare.

    Budget Reserve: Both the House and Senate targets show a commitment to building our state’s resources for the next economic downturn. The Senate targets include a $250 million addition to the state’s budget reserve. This would bring the state’s “rainy day” funds to $1.6 billion of the suggested $2.2 billion target. The House proposal includes $100 million in additional funding for the reserve.

    Now that the House and Senate have released the outlines of their budget proposals, we can expect to see finance bills shaping up. Senate Majority Leader Tom Bakk indicated that we will see the bills on the House and Senate floors in mid-April, which is earlier than the previously set “third committee deadline” of April 24.

    -Clark Biegler

  • House budget plan sets Minnesota on the wrong course

    by Clark Biegler | Mar 24, 2015

    Minnesota has recently turned the corner after more than a decade of frequent budget deficits, and now has a $1.9 billion surplus. This creates an opportunity for additional progress towards a fairer tax system and broadly-shared economic prosperity.

    But that’s not the path taken in the budget plan released today by the Minnesota House of Representatives. The plan includes a $2.3 billion tax target – that’s more than the available surplus. While the details of the budget plan are still to come, proposed severe cuts in services imply that fewer Minnesotans would have affordable health care, seniors and people with disabilities will go without services that enable them to live in the community, and we won’t invest in the workforce training that helps people get and keep good jobs.

    Taxes: House leadership has proposed a $2.3 billion tax target, which they indicate would include about $2.0 billion for tax cuts and the impact of dedicating some existing tax revenues to transportation. This would come on top of significant tax cuts passed in 2014. That figure is simply unsustainable. Minnesota’s recent history demonstrates that when the state does too much tax cutting in good times, it makes the hard times worse when the next economic downturn comes along. This target not only makes it impossible to invest in Minnesota today, it also threatens the state’s ability to sustainably fund nursing homes, roads and bridges, and other critical services in the future.

    Also concerning is that many of the tax cut proposals being discussed in the House would cut taxes only for the highest-income Minnesotans, reversing recent progress that has made Minnesota’s tax system more equitable.

    Spending Cuts: The largest cuts are proposed for Health and Human Services – a net $1.1 billion. And in fact, cuts within this area will likely be even larger, as the House has promised to increase funding for nursing homes. With such a harsh target, it is unlikely that the House will provide funding for affordable child care or community services for Minnesotans with disabilities. Instead, we expect that this budget will mean working Minnesotans will lose affordable health care coverage. Cuts are also proposed in economic development and the environment.

    New Spending and Budget Reserve: The targets include some modest higher general fund spending in some areas, primarily in E-12 Education and Transportation, which together total about $300 million. The targets also allocate an additional $100 million to the state’s budget reserve. This would bring the state’s “rainy day” funds to $1.4 billion of the suggested $2.2 billion target.

    The House Ways and Means Committee held a hearing last week where many Minnesotans testified to the unmet needs still experienced in their communities. The economic recovery is beginning to take hold, but many of our neighbors are still struggling. Minnesota needs targeted investments and sustainable tax changes, but the targets released today indicate that the House holds a different vision for our state.

    The Senate is expected to release their budget resolution and targets later this week.

    -Clark Biegler

    This post was updated to reflect information discussed in the March 24 House Ways and Means hearing. 

  • Legislators preparing to set budget priorities

    by Clark Biegler | Mar 23, 2015

    Last week many concerned Minnesotans testified on the needs of our state at the House Ways and Means Committee hearing on budget resolutions.

    Policymakers are getting ready to form the state’s FY 2016-17 budget, and as part of this process, the House and Senate put together their budget resolutions. These resolutions set maximum amounts for the state budget’s general fund revenues and expenditures – basically setting the size of the budget “pie,” and the amounts set aside in the budget reserve and cash flow accounts, also known as our “rainy day” funds.

    Each session, the House and Senate put forth the outlines of their budgetary visions through these resolutions. Once these are set, the legislative bodies put together their targets for the finance committees, which is where we’ll start to see the budget really take shape in the omnibus spending and tax bills.

    Given the context of the state’s projected $1.9 billion surplus, policymakers should continue charting a path where more Minnesotans have access to economic opportunity.

    While Minnesota’s economy has finally turned a corner, testifiers at the Ways and Means hearing highlighted areas of needed investments, including: supportive services that help seniors and people with disabilities live at home, opportunities for the state’s students to make sure they’re ready for college and the workforce, and improvements to our roads and bridges. We have also written about the uneven economic recovery and the need to invest in those Minnesotans who have been left behind.

    Policymakers also expressed great interest in the size of our state’s budget reserves. In the 2014 Legislative Session, policymakers improved our budget reserve to better meet the needs of Minnesotans during economic downturns, and dedicated up to one-third of any surplus in the November Forecast to building the reserve. In the most recent November Forecast, this meant that $183 million was added to the reserve. Now, at $1.3 billion, Minnesota’s total rainy day funds are much closer to what the state needs to weather a potential recession, which Minnesota Management and Budget estimates is $2.2 billion.

    As policymakers decide what to do with the projected positive balance, they should continue to make targeted investments in a future of opportunity for all Minnesotans.

    The House is expected to release its budget resolution tomorrow, with the Senate’s resolution expected Thursday or Friday.

    -Clark Biegler

  • Dayton’s supplemental budget focuses on children, broadening economic security

    by Clark Biegler | Mar 17, 2015

    Governor Mark Dayton today released the outline of his supplemental budget. We’re looking forward to seeing the details, but here’s our initial take: Dayton continues to focus on making the tax system work better for low- and moderate-income families, and making investments so that more Minnesotans can participate in the state’s economic success.

    The supplemental budget describes the governor’s changes to his budget proposal released earlier this year. The governor responds to the improved projected surplus in the February forecast with an additional $93 million in tax cuts, $709 million in new general fund spending and $63 million to finance an $850 million bonding bill.

    TaxesFamilies and children remain a continued focus of the governor’s tax package. Dayton’s supplemental budget includes $83 million in FY 2016-17 for improvements to the Working Family Credit, which the administration estimates would increase the credit by an average of $138 per year for more than 287,000 families. Dayton also includes $11 million to expand the K-12 Education Tax Credit.

    Health and Human Services: Dayton includes a long-overdue increase in Minnesota Family Investment Program (MFIP) cash assistance, which has not risen since 1986. The governor proposes $68 million in his supplemental budget to increase the monthly grant by $100. Dayton has also taken out his earlier proposal to increase premiums and out-of-pocket costs for the working families receiving affordable health insurance through MinnesotaCare.

    E-12 EducationStatewide pre-kindergarten continues to be a major priority of the governor. Dayton’s latest proposal includes an additional $235 million for pre-kindergarten in FY 2016-17 and $587 million in FY 2018-19. The governor also proposes an additional $41 million for special education and $16 million for Indian Education.

    Higher Education: Dayton continues to make college more affordable for Minnesota students. He proposes funding to the University of Minnesota and Minnesota State Colleges and Universities (MnSCU) to help them freeze tuition for students for another two years. He also proposes an additional $20 million for financial aid in the State Grant Program, which the administration estimates will increase the average state grant by $352 for about 93,000 students.

    Economic Development: Dayton proposes $10 million for the state’s Housing and Job Growth Initiative, which builds affordable housing in areas with job growth but not enough housing for workers.

    Stay tuned for our upcoming deeper dives into the governor’s supplemental budget recommendations, and find today’s budget materials from Minnesota Management and Budget here.

    -Clark Biegler

  • Dayton makes investments in workforce development, supportive housing and transit

    by Clark Biegler | Mar 05, 2015

    In our final bite on Governor Mark Dayton’s budget proposal, we look at how he seeks to strengthen the state’s economy by increasing workforce training opportunities, improving housing options and employment for people with mental illness, and investing in a better transit system.

    Dayton invests in basic skills education and specialized training so that Minnesotans can enter high-demand fields. To do this, Dayton proposes to refocus two existing grant programs to form Pathways to Prosperity, a new career pathways program. Between general and workforce development funds, Pathways to Prosperity would receive $12 million for the FY 2016-17 biennium.

    The governor also proposes $2 million in FY 2016-17 to support Minnesotans with severe mental illness, who experience higher rates of unemployment and poverty than other Minnesotans, to find stable jobs through Individual Placement and Supports. Policymakers expanded these services in FY 2014-15 with one-time funding; Dayton’s proposed increase will maintain that expansion.

    Dayton also seeks important investments in supportive housing. He proposes $2.5 million in FY 2016-17 in funding for Bridges, which provides rental assistance to those struggling with mental illness. Bridges currently has a waiting list of about 1,300 households, and the administration estimates that the increased funding will help 200 of those households.

    Dayton’s proposal also proposes $2.2 billion in revenues in FY 2016-17 dedicated to our state’s transportation needs, which would come from a mix of gas, vehicle registration and local sales taxes. As part of a broad transportation proposal, the governor includes several investments in transit. Dayton proposes $10 million in FY 2016-17 to increase bus service in greater Minnesota, including more morning and evening service hours and multi-county services. The $420 million of local sales taxes proposed in the governor’s budget would fund transit in the Twin Cities metro area, including provisions such as expanding existing bus operations by 27 percent, funding additional rapid bus lines, improving transit shelters, and meeting requirements for transitways like the Blue and Green light rail lines.

    Effective transit systems are critical to our state’s economic health. Because transit can provide access to good jobs, improvements to our transit lines should be done with low- and moderate-income workers in mind.

    In case you missed it, you can also check out our analyses of the governor’s taxearly childhoodeducation, and health and human services proposals.

    -Clark Biegler

  • Dayton’s health and human services budget invests in critical supports to Minnesota’s most vulnerable

    by Ben Horowitz | Mar 04, 2015

    Governor Mark Dayton’s budget proposal for health and human services would improve access to vital services for some of Minnesota’s most vulnerable populations, including children, people with mental illness or disabilities, and the elderly. His proposal includes a net increase of $185 million over forecasted general fund expenditures for FY 2016-17.

    MinnesotaCare. One problematic component of Dayton’s budget would increase the cost of health care for working Minnesotans getting health insurance through MinnesotaCare. The administration proposes increasing premiums and out-of-pocket costs to reduce MinnesotaCare expenditures by $65 million in FY 2016-17 and $87 million in FY 2018-19. These increased costs to the already-tight budgets of working families could force them to avoid needed care entirely. Given that the recent February forecast predicts a positive balance in the Health Care Access Fund, which funds MinnesotaCare, we urge the governor to drop this provision when he releases his updated budget proposal next week.

    Mental Health. People dealing with mental illness are also at a higher risk for problems with physical health, homelessness and chemical dependency. Dayton’s budget has several initiatives that recognize the interconnected nature of these issues. Most emblematic of this approach may be an investment in behavioral health homes. Behavioral health homes provide comprehensive care to improve patients’ overall health outcomes while also reducing their use of more expensive services, like emergency rooms. Dayton targets $6.9 million in FY 2016-17 and $24 million in FY 2018-19 to behavioral health homes. Dayton also proposes $2.8 million in FY 2016 and $4.3 million annually starting in FY 2017 to increase access to housing and supportive services for families dealing with mental illnesses — some of which is in Dayton’s housing budget.

    Some of Dayton’s other mental health proposals are more controversial. For example, Dayton’s budget would devote $26 million in FY 2016-17 and $38 million in FY 2018-19 to boost provider reimbursement rates and contract with private hospitals to increase the availability of services for chemical dependency and highly aggressive children. However, the funding increases are paired with proposals to shut down and cap services at state-run treatment sites. During hearings on the governor’s budget, advocates cited concerns that the expanded private sector services will not completely fill the gap left by the reduced public sites. This could mean that some Minnesotans would be left without the help they need.

    Dental Care. Low-income Minnesota children are about three times as likely to have their tooth decay go untreated compared to other kids. Visits to the emergency room for non-traumatic dental work cost the state $148 million over a three-year period. Dayton’s budget would spend $10 million in FY 2016-17 and $17 million in FY 2018-19 to address these issues by increasing Medical Assistance dental rates, thereby increasing access to dental services for low-income Minnesota families.

    Not all dental providers would be paid more under this plan. Currently, providers operating in areas where there aren’t many dental professionals receive a “critical access bonus” when they serve low-income patients. While Dayton’s proposal increases the base rate for dental services overall, it also decreases the critical access bonuses for Medical Assistance patients and community health clinics, and eliminates the bonus entirely for MinnesotaCare patients.

    MNsure. Dayton’s budget includes $12 million in FY 2016-17 and $13 million in FY 2018-19 for continued improvements and maintenance for the MNsure information technology system. This will help Minnesota improve the technology that connects consumers, insurance providers and the public sector in the health insurance marketplace.

    Food Assistance. The Minnesota Food Assistance Program helps low-income people over 50 who are ineligible for federal nutritional assistance pay for food. Dayton proposes increased funding of $246,000 in FY 2015, $1.1 million in FY 2016-17, and $1.9 million in FY 2018-19 to meet the administration’s projections for increased demand.

    Housing and Supportive Services for People with Disabilities. Dayton’s budget includes $3.1 million in FY 2016-17 and $22 million in FY 2018-19 to better address the housing needs of Minnesotans with disabilities. The administration is also changing some of their supportive housing guidelines, aiming to continue providing access to group residential homes while also increasing the ability for people with disabilities to live in more affordable, community-based supportive housing.

    When a family hits a rough patch due to illness, economic hardship, or just plain bad luck, public services can provide critical support. Dayton’s proposals recognize the complexity of the hurdles many of these families face.

    -Ben Horowitz

  • Governor Dayton invests in Minnesota’s students

    by Clark Biegler | Feb 26, 2015

    We’ve been sifting through Governor Mark Dayton’s budget. Previously we analyzed his tax and child care proposals, and now we’re looking into his education proposals.

    In his budget, Dayton affirms his commitment to Minnesota’s students. About half of the new spending in the governor’s budget goes to our state’s students, from early childhood to college.

    Two major initiatives in E-12 education are expanding pre-kindergarten and additional funding for school districts under the general formula.

    Dayton proposes funding to encourage expansion of free pre-kindergarten starting in FY 2017. Under the governor’s proposal, schools would need to provide matching funds and districts would be given a year to plan before pre-kindergarten begins. Since Dayton proposes that pre-kindergarten will be available in more districts over time, the costs grow accordingly, from $106 million in FY 2017 to $360 million in FY 2018-19.

    The governor’s pre-kindergarten proposal represents one of several early childhood priorities that he has put forth to serve children in their earliest years, including child care through Basic Sliding Fee and Head Start. The governor uses a multi-pronged approach to help children to start off in stable environments and serve the diverse needs Minnesota’s families.

    Dayton also increases the general funding formula for school districts by one percent in both FY 2016 and 2017. This translates to a $58 increase per pupil in FY 2016 and a $59 increase per pupil in FY 2017. This helps Minnesota schools keep up with the rising costs of teaching Minnesota’s students.

    The governor also makes additional investments in FY 2016-17 in our E-12 students, including:

    • $4 million for two initiatives to address the achievement gap, the Northside Achievement Zone and the St. Paul Promise Neighborhood
    • $8 million for the state’s English learning program
    • $10 million for Minnesota Reading Corps
    • $19 million for Head Start
    • $28 million for school breakfasts for students in pre-kindergarten to 3rd grade

    Students in higher education are also a focus. Dayton’s budget proposal includes $25 million in improvements to financial aid through the Minnesota State Grant program. He would increase the maximum amount of financial aid to meet the cost of Minnesota’s public colleges and universities. The grant program also has a living allowance, which the governor would increase to match the federal poverty level. This would help Minnesota students better access all of our state’s public colleges and universities and help students meet their basic needs while in school.

    Dayton also proposes providing half of the funding required for the University of Minnesota to continue a tuition freeze for another two years. In the 2013 Legislative Session, policymakers froze tuition at the University of Minnesota and Minnesota State Colleges and Universities (MnSCU) for two years. Under this year’s proposal, the governor asks the University of Minnesota to provide half of the funds needed for students to see another two years of flat tuition. Dayton has indicated that he will provide the same to MnSCU in his supplemental budget if MnSCU resolves an internal conflict between administration and faculty.

    Dayton’s budget proposal represents important investments in Minnesota’s students and future workforce. Making educational opportunities more affordable for Minnesotans of all ages should be a high priority for the state.

    -Clark Biegler

  • Governor Dayton’s budget invests in children

    by Ben Horowitz | Feb 20, 2015

    To make Minnesota a state where every child can thrive, we must make efforts to support children directly, but also invest in the adults who look after them. Appropriately, Governor Mark Dayton’s budget includes several initiatives to address the needs of children and their caretakers — both parents and professional child care workers. Some of the highlights include:

    Increasing access to Basic Sliding Fee Child Care Assistance. Dayton proposes an additional $13 million in FY 2016-17 to help more families afford child care through Basic Sliding Fee. Basic Sliding Fee helps families pay for care for children from infancy through age 12, but had a 6,157 family waiting list as of November.

    With Basic Sliding Fee, children can thrive in stable environments while their parents are able to get to work or class. The administration estimates this proposal would result in a roughly 10 percent decrease in the waiting list.

    Expanding the Child and Dependent Care Tax Credit. For the FY 2016-17 biennium, Dayton proposes a $100 million expansion so that more families can claim the Child and Dependent Care Tax Credit, which helps families offset a portion of the costs of care for children and some other dependents. He would also increase the maximum amount families can claim.

    This approach of additional funding for Basic Sliding Fee along with a targeted expansion of the Dependent Care Credit are important steps that policymakers should support so that more Minnesota families can afford the child care that meets their needs. We encourage a stronger investment in Basic Sliding Fee, which focuses on the families who struggle most to afford child care.

    Strengthening the Child Care Assistance Program. About $1.6 million in FY 2016-17 is proposed to simplify the Child Care Assistance Program for families and providers. Child Care Assistance includes Basic Sliding Fee and child care through the Minnesota Family Investment Program. Dayton’s proposal reduces administrative burdens around payment issues and allows children to stay in consistent care if their parent’s work schedule changes. These changes will help families as well as reduce administrative complexity and unpredictability for providers.

    Providing mental health consultations for children and their families. When surveyed about their needs, manychild care providers asked for help identifying and addressing the mental health issues observed in the children and families they serve. Dayton’s budget includes $922,000 in FY 2017 and $1.5 million annually thereafter for mental health consultations for children when they enter child care settings through public services like early childhood special education or the Minnesota Family Investment Program. In addition to improving health outcomes for children, the administration predicts that these consultations will reduce expulsions from child care and reduce turnover rates for child care staff.

    Increasing the number of Head Start opportunities. Dayton’s proposal includes $19 million annually starting in FY 2017 so that more three-to-five-year-olds can participate in Head Start. Head Start prepares pre-schoolers for kindergarten and connects parents with supportive services. The administration estimates that the proposed increase would help 2,485 more children enter kindergarten better prepared for learning.

    Encouraging school districts to establish pre-K. The governor’s budget takes some first steps toward voluntary pre-kindergarten programming being available to all four-year-olds. His budget includes funding for some school districts to expand pre-K, although school districts would need to provide matching funds. Dayton’s budget proposes $3 million in funds for preparation in FY 2016, followed by $106 million in FY 2017, and $360 million in FY 2018-19 for implementation.

    Every child and family has a unique set of needs. Dayton seeks to put more children on the path to a healthy, successful future. This is a goal that lawmakers should also embrace this session.

    -Ben Horowitz

  • Affordable child care, transportation are focal points of Dayton’s tax proposal

    by Nan Madden | Feb 11, 2015

    We’ve been digging into the details of Governor Dayton’s budget proposal, and I’ve been looking at the tax portion. It follows familiar themes from the Governor’s previous tax efforts: focusing on the concerns of middle-class families and building ladders into the middle class, and raising revenues to fund investments in the state’s economic success.

    The two primary pieces of the Governor’s tax package are: increasing transportation funding and helping Minnesota families with the high cost of child care.

    Dayton proposes a $100 million expansion in the state’s Child and Dependent Care Tax Credit, which seeks to make affordable child care available to more Minnesota families. Child care can be one of the largest expenses that families with children face. The Dependent Care Credit provides a tax credit based on what a family pays for child care so that parents can work or look for work. However, it hasn’t kept up with the rising costs of child care. Under Dayton’s proposal:

    • The maximum income at which a family can qualify for a credit would go up to $112,000 for families with one dependent and up to $124,000 for families with two or more dependents. It’s currently at $39,000.
    • The maximum amount of credit a family can receive would go up to $1,050 for families with one dependent, and up to $2,100 for families with two or more dependents.

    An estimated 110,000 Minnesota families would benefit from this proposal by an average of $429, including 92,000 families who don’t currently receive the credit. This tax credit can also be used for care for elders and people with disabilities, as long as they are claimed as dependents by the taxpayer and the care is so the taxpayer can work or look for work. That would continue to be true under Dayton’s proposal.

    The Dependent Care Credit expansion and Dayton’s proposed increase in funding for Basic Sliding Fee Child Care Assistance are two important steps to help Minnesota families with the cost of child care. Policymakers should follow Dayton’s lead in making affordable child care a priority this session. We recommend making the Dependent Care Credit proposal more targeted by not raising the income ceiling quite as far. We’d also put additional resources into Basic Sliding Fee, which is a better mechanism to reach the families that struggle most to afford child care.

    The other major component of Dayton’s tax proposal seeks to address the state’s transportation needs by raising an additional $2.2 billion in FY 2016-17 in revenues dedicated to transportation and transit. This includes:

    • A 6.5 percent gross receipts tax on gasoline;
    • An additional half-cent local sales tax in the 7-county metro area for transit; and
    • An increase in vehicle registration fees (commonly called “tabs”).

    These funding sources are all regressive taxes, which means that low- and moderate-income Minnesotans pay a higher share of their incomes on those taxes. Given this fact, and the role that transportation plays in access to jobs and economic opportunity, meeting the transportation needs of low-income persons and economically struggling communities should be an important factor in decisions about where to invest in transit and transportation.

    A less prominent but also important piece of Dayton’s budget is a package of initiatives to close tax loopholes used by a relatively small number of corporations, and thereby create a more level playing field for all business taxpayers.

    The backdrop for this year’s tax debate is the 2013 tax reform bill. That bill raised revenues to end the cycle of frequent budget deficits, and it made the tax system more fair. This was followed by tax bills passed in 2014 that cut taxes in FY 2016-17 by about $1 billion.

    Through actions taken in 2013 and 2014, Minnesota has shrunk the gap between what most Minnesotans pay in state and local taxes (measured as a share of their incomes) and the smaller percentage that those with the highest incomes pay.

    This year, we should continue the progress for a fair tax system and sustainable budget choices through limited tax cuts focused on the needs of Minnesotans. The larger tax cuts that some have proposed would make it harder to invest in our schools or make child care and higher education more affordable, as Dayton does in his budget. As we learned in the 2000s, large tax cuts in the good years make it harder to respond to the next economic downturn, and put a whole range of critical state services, from schools to nursing homes, at risk.

    -Nan Madden

  • Governor’s budget continues to invest in a strong future for Minnesota

    by Clark Biegler Goldenrod | Jan 27, 2015

    Governor Mark Dayton’s state budget proposal released today provides new investments for our state, and particularly focuses on getting our youngest Minnesotans started on the right foot.

    The positive balance projected in the November forecast allows Minnesota to make some much needed investments. And Dayton’s proposed budget makes targeted investments in a future of opportunity for all Minnesotans, particularly for children and young people.

    We’re just starting to dig into the details, but here’s what we see on some of our priorities for the session.

    Dayton’s budget increases access to affordable child care through a range of options. Affordable child care supports children’s development, helps parents get and keep good jobs, and allows employers to find the reliable workers they need.

    Dayton’s budget includes $13 million in new funding in FY 2016-17 for Basic Sliding Fee Child Care Assistance. The governor’s proposal is a important step in the right direction. Basic Sliding Fee helps low- and moderate-income working parents in every part of the state afford the care that meets the needs of their children age zero to 12. Today more than 6,000 Minnesota families are on the waiting list.

    On the tax side, Dayton also proposes to assist Minnesota families with the high cost of child care. He expands the state’s Child and Dependent Care Credit, which provides a tax credit based on what families have paid for child care so that parents can work or look for work. His proposal would:

    • Increase the maximum income at which a family can receive the credit to $112,000 for families with one dependent and $124,000 for families with two or more dependents. Currently, the credit is only available to families with incomes less than roughly $39,000.
    • Increase the size of the credit to up to $1,050 for one child and $2,100 for families with two or more children.

    The administration estimates 110,000 Minnesota families would benefit by an average of $429. This proposal would continue the progress made over the past few years to make the tax system work better for working families. We encourage making this proposal more targeted to make resources available to further boost Basic Sliding Fee for those families that struggle most to afford the cost of care.

    Among the budget plan’s other investments in young Minnesotans are increasing funding for school districts by 1 percent each year through the basic formula, funding for schools to expand pre-kindergarten, as well as addressing the waiting list for Head Start, which prepares low-income children for school.

    Making a college education more affordable is another one of Dayton’s priorities. His budget would increase financial aid so that Minnesota students can better access all of our state’s public colleges and universities, and help students meet their basic needs while in school.

    Stay tuned for our upcoming in-depth dives into some of the governor’s proposals. In the meantime, you can check out links to Dayton’s budget proposal.

    -Clark Biegler

  • Where the surplus went

    by Clark Biegler | Jun 04, 2014

    After more than a decade of frequent budget deficits, a state budget surplus opened up the opportunity for different kinds of conversations in the 2014 Legislative Session.

    The state’s two-year budget was set last year, but a projected $1.2 billion positive balance for the FY 2014-15 budget cycle allowed policymakers and advocates to discuss improving our tax system, increasing funding for critical services and saving for a rainy day.

    Graph How the projected $1.2 billion surplus was used

     By the time it adjourned, the Legislature allocated most of the surplus through two major tax bills, a supplemental budget bill and a capital investment (or bonding) bill. These bills included provisions to expand opportunity for more Minnesotans and make our tax system work better.

    The largest portion of the surplus – 45 percent – went to the tax bills, which total $550 million in FY 2014-15 and over $1 billion in the next budget cycle.

    • The first tax bill (House File 1777) reduced income taxes for many Minnesotans through provisions that mirror federal tax changes, and repealed three business-to-business sales taxes. It also increased the Working Family Credit by about 25 percent, making our tax system fairer and helping families working at low wages to make ends meet.
    • The second tax bill (House File 3167) increased property tax refunds for homeowners and renters, and increased state aids to some cities and counties.

    About one-fifth of the surplus went to the $262 million supplemental budget bill (House File 3172). The bill included investments in improving the quality of life for vulnerable Minnesotans and expanding opportunity, including:

    • A 5 percent increase in reimbursement rates for home- and community-based services for seniors and people with disabilities.
    • Grants to advance health equity.
    • Improved educational opportunities under the Minnesota Family Investment Program.
    • Increased funding for schools.
    • Improvements to early learning scholarships.

    Policymakers also passed a substantial capital budget bill (House File 1068), commonly called the bonding bill because the state issues bonds to pay for capital investment projects. But this year, policymakers also used 16 percent of the surplus to pay directly for capital projects.

    The surplus was also used to prepare for the next economic downturn through a $150 million addition to the state’s budget reserve. Healthy reserves are necessary to meet the needs of Minnesota residents even in the face of the unexpected.

    Finally, three percent of the surplus went to other bills with a financial impact, and about three percent was left “on the bottom line”, or unallocated. This was a wise hedge against uncertainty, as the surplus was only a projection, not money already on hand.

    -Clark Biegler