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Process & Reforms

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  • Supplemental budget invests in Minnesota’s future

    by Clark Biegler | May 20, 2014

    The supplemental budget (House File 3172) approved by the Legislature last Friday and signed by Governor Dayton this morning makes some key investments to build opportunity for all Minnesotans. Using a portion of the $1.2 billion surplus projected in the February Forecast, the final supplemental budget includes $262 million in additional spending for this biennium and $850 million in FY 2016-17.

    Table Policymakers decide on final supplemental budget bill 

    The supplemental budget’s provisions for health and human services include investments to build opportunities for Minnesotans to lead healthy lives:

    • A 5 percent rate increase for home- and community-based services for seniors and people with disabilities.
    • A funding increase for nursing facilities to fill any funding gaps that arise from the minimum wage increase.
    • Improved access to educational opportunities for participants in the Minnesota Family Investment Program.
    • Funding for health equity initiatives.

    Education provisions in the final bill invest in our students and seek to narrow the racial achievement gap in our state:

    • A $23 million increase in per-pupil funding in the general education formula for all school districts.
    • Additional funding for early learning scholarships, which enable low-income children to receive high-quality early education.
    • Additional funding and improvements for English Language Learners, reduced price student lunches, and the Northside Achievement Zone and the St. Paul Promise Neighborhood.

    Other provisions in the bill include funding for:

    • Housing project grants.
    • Greater Minnesota transit.

    Even though this year wasn’t a budget year, policymakers took advantage of the surplus to make investments that create opportunities for many Minnesotans.

    -Clark Biegler

  • Omnibus tax bill includes Renters’ Credit increase

    by Nan Madden | May 09, 2014

    Late Wednesday night, the Tax Conference Committee put together the second major tax bill of the session, House File 3167.

    Throughout this session, we’ve called on policymakers to make the tax system more fair. We applaud the conference committee for including a one-time 6 percent increase in the Property Tax Refund for Renters, or Renters’ Credit, in House File 3167. As a result of this provision, more than 346,000 Minnesota households will receive an average $36 more in their refunds this year. This represents a $12.5 million boost in the Renters’ Credit. The increase is automatic – taxpayers won’t need to submit anything in addition to the usual property tax refund forms or amend applications that have already been filed.

    Some of the other major provisions in the bill include:

    • A 3 percent increase in the Property Tax Refund for homeowners.
    • Property tax reductions for farmers.
    • Additional state aid to counties facing challenges with aquatic invasive species.
    • Increases in Local Government Aid for cities.
    • Adjustments to the sales tax exemption for local governments passed last year.
    • June Accelerated Sales Tax changes so that fewer retailers are affected and the advanced payment is smaller.

    House File 3167 includes $103 million in tax reductions for the FY 2014-15 budget cycle and just under $119 million in FY 2016-17. Combining the two tax bills, 44 percent of the projected balances in both this biennium and in FY 2016-17 go to tax reductions.

    Policymakers were wise to keep the size of the second omnibus tax bill limited, given the substantial tax cuts already passed this session. We’ve emphasized the importance this session of making sure that tax and budget choices are sustainable, as Minnesota only recently turned the corner after more than a decade of frequent budget deficits. Minnesota’s recent history demonstrates that when we go too far in cutting taxes in the good times, we face larger deficits and make deeper cuts to critical services when the economy turns sour.

    The state’s recent April Economic Update provided a good reminder that the forecasted surpluses are only projections, and noted that future economic growth may not be as robust as previously expected.

    There may or may not be a few more adjustments to the omnibus tax bill. While the tax conference committee considers its work finished, there could be some other small adjustments before the conference report is formally signed next week.

    -Nan Madden

  • Governor Dayton’s dependent care credit proposal merits another look

    by Nan Madden | May 05, 2014

    On Sunday, the Tax Conference Committee got a second look at a proposal to increase support for Minnesota families with one of the most substantial expenses that many face: child care costs.

    The Department of Revenue presented an updated version of Governor Dayton’s proposal to expand Minnesota’s dependent care tax credit. The proposal would:

    • Increase the maximum income at which a family can receive the credit to $82,000 for families with one dependent and $94,000 for families with two or more dependents. It’s currently around $39,000.
    • Increase the size of the credit for which families can qualify. The new maximum credit would be $1,050 for families with one dependent and $2,100 for families with two or more.

    An estimated 94,000 Minnesota families would receive the expanded credit, which would average $477. The proposal would be a $32 million increase in the credit in FY 2015.

    The committee presentation included a reminder that while the credit goes primarily to families with child care expenses, it is also available to families with disabled dependents of any age.

    The Tax Conference Committee has some important decisions to make in the waning days of the legislative session. Our top priority for the second tax bill is the House’s boost to the Renters’ Credit.

    But the conference committee should give serious consideration to the Governor’s dependent care proposal as an additional move to make the tax system work better for working families. It is more targeted than the original proposal, and it could be strengthened by further focusing on those with the greatest needs.

    The Governor’s proposal would help many Minnesota families, but there is still more work to do, given the importance of affordable, reliable child care for parents to succeed in the workplace and to support children’s development. Low-income families can manage the monthly costs of child care through the Basic Sliding Fee Child Care assistance, which has nearly 8,000 Minnesota families on waiting lists. Additional funding to Basic Sliding Fee child care assistance needs to be a top priority in next year’s budget.

    -Nan Madden

  • Legislature works to complete budget bills

    by Clark Biegler | May 02, 2014

    This week, Minnesota policymakers continue to shape the final major budget bills of the session. Targets set late last week are guiding their work, although we may see adjustments and tweaks to those targets before the final deals are struck.

    The targets are $293 million in this budget cycle for the supplemental budget bill, $103 million for the second tax bill and $200 million in cash for capital investment projects.

    Table 2014 budget targets

    The supplemental budget conference committee met through the weekend to sort out the differences between the House and Senate versions of the supplemental budget bills. The target of $293 million comes in lower than the House proposal but larger than the Senate’s. Some of what’s at stake are provisions in House and Senate bills that improve racial health equity and work to close achievement gaps in education.

    The tax conference committee also worked through the weekend. Its target of $103 million is definitely in the ballpark with the House’s second tax bill of $110 million and the Senate’s at $108 million. However, since there is not a lot of common ground between the two tax bills, some compromises are likely ahead. One provision that we strongly believe should be part of a final tax bill is the House’s one-time improvement to the Renters’ Credit.

    The Senate released its bonding bill today. The $200 million target for “bonding cash” represents capital improvement projects to be funded through cash, rather than through the more traditional bonding process.

    The tax and budget decisions to be made will build on work done already this session. Policymakers passed a tax bill (House File 1777) that included an increase to the Working Family Credit and a boost to the budget reserve. They also passed a bill for additional heating assistance for families in response to the harsh winter weather this season.

    As they make their final tax and budget choices this session, we encourage policymakers to make investments that make our state a place where everyone has the opportunity to succeed. Stay tuned for more information on how these items progress!

    -Clark Biegler

  • Budget priorities shaping up

    by Clark Biegler | Apr 22, 2014

    Legislators begin meeting today to reach agreement on what portion of the $1.2 billion projected surplus to invest in better education, improved health and a strong state road system.

    The supplemental budget conference committee starts today to work out the differences between Governor Dayton’s supplemental budget and the House and Senate budget proposals, which are housed in House File 3172 (with some additional Senate transportation funding in Senate File 2859).

    The Governor proposed modest spending, which he called “essential expenditures,” that totals $141 million. The House and Senate proposed larger spending bills ($322 million in the House and $348 million in the Senate), primarily for increased education and transportation spending over the Governor’s recommendations.

    The House and Senate budget bills focus on several similar education priorities intended to close the achievement gap. In transportation, they allocate funds for road repairs to keep our state’s infrastructure strong after the especially harsh weather. Legislators also agree to invest in health and human services, and like the governor, they propose a rate increase for home- and community-based services for seniors and people with disabilities. The House and Senate also include funding for nursing facilities to fill any funding gaps from the minimum wage increase.

    Table Proposed supplemental funding (general fund FY 2014-15) 

    Legislators have already passed a tax bill this session that cut taxes by $443 million in this budget cycle and strengthens our budget reserve by $150 million (House File 1777). A second tax bill has also passed both houses, and a tax conference committee will meet later this week to work out the differences between the House and Senate versions of House File 3167.

    When making these budgetary decisions, we encourage policymakers to make sustainable choices that focus on creating a fairer tax system, expanding opportunity and building ladders into the middle class. Addressing racial gaps in education and health is a good investment.

    -Clark Biegler

  • Renters’ Credit should be part of tax plan

    by Nan Madden | Apr 15, 2014

    When the Legislature comes back into session next week after the Easter/Passover break, we encourage policymakers to focus their final tax bill negotiations on tax policies that create a fairer tax system.

    A proposal that fits that principle well and should be part of final tax legislation is an increase in the Renters’ Credit. The House’s omnibus tax bill (House File 3167) includes a provision to boost the Renters’ Credit by 5 percent for this year only. More than 317,000 Minnesota households would see an average $33 increase in their property tax refunds. The increase in the Renters’ Credit would be automatic – taxpayers wouldn’t need to submit anything in addition to the usual property tax forms or amend applications that have already been filed.

    This provision increases the Renters’ Credit by $10.4 million. When they receive their refunds, Minnesota renters are able to catch up on the basics, including medicine, food and school supplies.

    The proposed increase in the Renters’ Credit would make our tax system fairer. Low- and moderate-income Minnesotans pay a higher share of their incomes in state and local taxes than those with the highest incomes. The Renters’ Credit limits how much of their incomes these Minnesotans pay in property taxes.

    Your organization can demonstrate your support for an increase in the Renters’ Credit by joining a sign-on letter by the close of business on Thursday, April 17.

    After the break, a conference committee will convene to work out a compromise between the House and Senate versions of the second tax bill passed this session, House File 3167. Right before the break, the Senate passed its version of House File 3167, which includes $101 million in tax reductions for FY 2014-15 and $107 million in the next biennium. As with its House counterpart, the bill focuses primarily on sales tax and property tax provisions.

    The first tax bill passed this session, House File 1777, added $150 million to the state’s budget reserve and made $443 million in tax cuts in this biennium and over $1 billion in the next budget cycle, focused on income tax conformity, the repeal of three business-to-business sales taxes, and estate and gift taxes.

    Given the size of the tax cuts in House File 1777, we encourage policymakers to keep the second tax bill limited. The state’s recent April Economic Update provides a caution about the uncertainty inherent in economic projections, and our state’s recent history reminds us that going too far in tax cutting during the good times threatens our ability to sustainably fund our schools, health care and other critical services.

    In the remaining days of the session, policymakers should maintain their focus on sustainably funding our state’s priorities, making the tax system fairer, and investing in a future of shared economic success.

    -Nan Madden

  • Budget bills make additional investments in education

    by Clark Biegler | Apr 15, 2014

    A quality educational system plays a critical role in a state’s economic success. For Minnesota to build an economy that works for everyone, all Minnesota children need access to quality education regardless of their race, income or where they live.

    Education was high on policymakers’ priorities last session, and the House and Senate’s supplemental budgets continue on that path this year. Both the House (House File 3171) and Senate (Senate File 767) supplemental education funding bills make further investments in our state’s learners.

    The House adds $75 million in E-12 funding for FY 2014-2015, while the Senate adds $41 million. Both bills include funding for common priorities, like:

    • English Language Learners.
    • Reduced price school lunches.
    • Early childhood literacy.
    • Achievement gap initiatives, the Northside Achievement Zone and the St. Paul Promise Neighborhood.

    In addition, the House includes $54 million to increase per-pupil funding in the general education formula for all school districts. The Senate adds $8.8 million for early learning scholarships, which enable low-income children to attend high-quality early education opportunities, as well as $8.9 million for a per-pupil allowance increase for early childhood family education.

    Both the House and Senate wrapped all of their supplemental funding proposals into one omnibus bill (House File 3172), which passed the House on April 3 and the Senate on April 8. A conference committee will convene after the legislative Passover/Easter break to work out the differences.

    -Clark Biegler

  • Health and Human Services supplemental budget bills increase funding for health care workers

    by Clark Biegler | Apr 14, 2014

    The Legislature made important progress in increasing access to health care for Minnesotans last session using limited resources, and the positive balance in the February Forecast has allowed policymakers to propose additional investments in health and human services this year.

    The House Health and Human Services supplemental funding bill provides $88 million in FY 2014-15, while the Senate provides $95 million.

    The House and Senate bills have many similarities. They both include:

    • A 5 percent rate increase for home- and community-based services to seniors and people with disabilities.
    • A funding increase for nursing facilities (to fill any funding gaps that arise from a minimum wage increase).
    • Improved access to educational opportunities for participants in the Minnesota Family Investment Program.

    The bills also include funding for health equity provisions that work toward Minnesota’s people of color having the same access to good health that white Minnesotans enjoy. The House and Senate bills provide grant funding for health equity programs for Somali women, and the House has additional funding for grant programs that address dementia outreach, and immigrant and refugee mental health. The Senate bill carries a provision that would require the state to develop a plan for releasing health care quality data by several indicators (including race and ethnicity) that are related to health disparities.

    Both the House and Senate wrapped all of their supplemental funding proposals into one omnibus bill (House File 3172). The bill passed the House on April 3 and the Senate on April 8. A conference committee will convene after the legislative Passover/Easter break to work out the differences.

    -Clark Biegler

  • House tax bill boosts property tax refunds for renters and homeowners

    by Nan Madden | Apr 03, 2014

    The second major tax bill of the session is moving through the Minnesota House of Representatives this week, and it takes an important step forward for low- and moderate-income taxpayers.

    The bill would boost the Renters’ Credit by 6 percent for this year only: more than 317,000 Minnesota households would see an additional $39 in their refunds. Homeowners would see a 3 percent increase in their property tax refunds. The increase would be done automatically – taxpayers wouldn’t need to submit anything in addition to the usual property tax refund forms or amend applications that have already been filed.

    This provision was part of the House’s Property Tax and Local Division Report, House File 1884, authored by Representative Jim Davnie, and was based on House File 3142 (Representative Tim Faust) and House File 2929 (Representative Rick Hansen).

    The Renters’ Credit provides a property tax refund to low- and moderate-income renters whose property taxes are high in relation to their incomes. The Renters’ Credit is effective in limiting how much of their incomes these Minnesotans pay in property taxes. When they receive their refunds, Minnesota renters are able to catch up on bills and purchase basics like medicine, food, and school supplies in their local communities.

    The Renters’ Credit is important to Minnesotans all across the state. More than one-quarter of qualifying households include seniors or people with severe disabilities, who may struggle to get by on fixed incomes. In 14 Greater Minnesota counties, at least half of participating households include seniors and/or people with disabilities.

    Even after the progress made toward tax fairness in last year’s tax bill, low- and moderate-income Minnesotans still pay a higher share of their incomes in state and local taxes than those with the highest incomes. The proposed increase in the Renters’ Credit is a good step to narrow that gap. While important improvements were made to the Renters’ Credit last year, we have not fully made up lost ground from 2011, when the Renters’ Credit was cut by 13 percent.

    The omnibus tax bill, House File 3167, which contains the increase in the Renters’ Credit, is up for a floor vote as soon as tomorrow. The bill focuses on sales taxes, property taxes and local provisions; House File 1777, which passed earlier in March, focused on income tax conformity, the repeal of business-to-business sales taxes, and estate and gift taxes.

    Haven’t filed for your property tax refund yet? You can find forms and instructions on the Department of Revenue’s website.

    -Nan Madden

    Note: Since this blog was originally published, the bill was amended on the House floor. The current version of the bill would boost the Renters’ Credit by 5 percent for this year only; more than 317,000 Minnesota households would see an additional $33 in their refunds on average. This is an increase of $10.4 million.

  • Keys to a healthy state budget

    by Clark Biegler | Apr 01, 2014

    Minnesota has recently turned the corner from more than a decade of frequent budget deficits to a $1.2 billion surplus. But unforeseen events and the inevitable ups and downs of the business cycle create volatility in state economies and state budgets. These events, like extreme weather or recessions, can’t be avoided, so it’s important for states to address volatility so they can meet the needs of their residents even in the face of the unexpected.

    A recent report from The Pew Charitable Trusts, Managing Uncertainty: How State Budgeting Can Smooth Revenue Volatility, explores uncertainty and revenue volatility in state budgets. I recently had a chance to hear Pew’s research presented to the House Tax Committee.

    Pew recommends three strategies for states to evaluate and strengthen their responses to volatility:

    • Regularly study volatility in their budgets and make policy recommendations to manage uncertainty.
    • Release budget forecasts as close as possible to the time budget decisions are made.
    • Develop mechanisms to create a healthy budget reserve.

    Minnesota already does well on some of these strategies, and has taken recent steps to improve how it deals with volatility.

    Minnesota’s most recent “deep dive” into volatility was the 2008 Minnesota Budget Trends Commission report. The Commission made a number of recommendations in order to more adequately respond to the level of volatility in Minnesota’s state budget, including: a larger budget reserve, avoiding permanent tax or spending changes that would take the budget out of balance in the following biennium, and refilling a depleted reserve within two biennia. The state could benefit from comprehensively studying volatility more regularly.

    Minnesota also does well on the strategy of releasing timely budget forecasts. Minnesota releases two economic forecasts each year, one in November and one in February. The November Forecast informs the development of the Governor’s budget, and the February Forecast provides more current data to policymakers as they make budget choices each spring.

    Minnesota recently took some steps forward along the lines of Pew’s recommendation of building reserves that would better meet the needs of Minnesotans in the next economic downturn. The recently passed House File 1777adds $150 million to the reserve. It also requires that Management and Budget set a recommended reserve level each year, and requires that one-third of any positive balance in a November forecast go to the budget reserve until it reaches MMB’s recommended amount. In January, Minnesota Management and Budget recommended reserves of $1.9 billion. That figure is substantially higher than the prior budget reserve target of $653 million.

    Volatility in state budgets is inevitable. But with careful planning, states can be better prepared and avoid drastic cuts to vital services when a downturn hits.

    -Clark Biegler

  • Tax bill includes improvements for working families, boosts reserves

    by Nan Madden | Mar 21, 2014

    The Minnesota Legislature took important steps to make the tax system work better for working Minnesotans today when it passed two great improvements to the Working Family Credit. House File 1777 conforms the credit to federal improvements reducing marriage penalties starting in tax year 2013, and it increases the maximum credit starting in tax year 2014. These two improvements together represent about a 25 percent increase in the Working Family Credit.

    House File 1777 also includes a number of other federal conformity items, which make Minnesota’s tax system simpler by mirroring a number of credits and deductions found in the federal tax code, and repeals three business-to-business related sales taxes (commonly called ‘B2B’).

    The bill also repeals the gift tax enacted last year and cuts Minnesota’s estate tax. We’ve argued that policymakers should minimize the loss of revenue and the impact on tax fairness as they sought to address some technical problems with the estate tax. The estate tax cut passed today is about $50 million smaller in FY 2016-17 than other versions on the table this year.

    House File 1777 also makes a $150 million contribution to the budget reserve. As we come out of more than a decade of frequent budget deficits, it’s wise to strengthen our budget reserves to prepare for the next downturn in the business cycle. Adequate reserves soften the shock of future budget shortfalls and enable the state to better meet the needs of Minnesotans during tough times.

    In total, the bill cuts taxes by $443 million in this budget cycle, and $956 million in FY 2016-17.

    Policymakers in the House and Senate said today they expect to put together a second tax bill before the session is over.

    -Nan Madden

  • Bill to boost budget reserve passes Senate committee

    by Clark Biegler | Mar 14, 2014

    As Minnesota enjoys a projected surplus after more than a decade of frequent budget deficits, policymakers are considering steps for a more robust “rainy day” fund to help the state better respond to the next economic downturn.

    Yesterday the Senate Finance Committee passed a bill authored by Senator Rod Skoe that would increase the state’s budget reserves (Senate File 2250) and set a mechanism to add funds to the reserves in future years.

    Minnesota Management and Budget currently recommends reserves of $1.9 billion, so that the state is well prepared for the next economic downturn. However, current budget reserves of $661 million and a cash flow account of $350 million only amount to half of this figure.

    Senator Skoe’s bill would make several changes to state laws regarding the budget reserve. It would:

    • Allocate $150 million of the positive balance from this year’s February Forecast to the reserve.
    • Automatically transfer up to a third of any future positive budget balances into the reserve account until it reaches a certain level.
    • Recalculate the target amount needed in the reserve account each year, so that the budget reserve target represents a percent of the state budget (instead of a fixed dollar amount as it does now).

    Current law requires that any positive balances go toward the budget reserve until it is filled to $653 million.

    Policymakers should strengthen our budget reserves to prepare for the next downturn in the business cycle. Adequate reserves soften the shock of future budget shortfalls and enable the state to better meet the needs of Minnesotans during tough times. The current level is not enough to protect us against the next recession. We are glad to see that the Senate is making the budget reserves a priority.

    Senate File 2250 will next be heard in the Senate Tax Committee.

    -Clark Biegler

  • A look at the House budget priorities

    by Clark Biegler | Mar 14, 2014

    Priorities in the House budget targets released this afternoon include $550 million in tax cuts, $488 million in new spending, and $195 million on the “bottom line.”

    Pie chart House budget targets


    Taxes: $502 million of the House’s proposed tax cuts have already been passed as House File 1777, which includes two primary components:

    • Federal conformity items, including an improvement to the Working Family Credit for married filers, addressing the ‘marriage penalty’ faced by non-itemizers and several other items.
    • ‘B2B repeal,’ or the elimination of three business-related sales taxes.

    That leaves about $48 million to be dedicated to property tax reductions for homeowners, renters and farmers.

    It is still the case that low- and moderate-income Minnesotans pay a higher percentage of their incomes in state and local taxes than the highest-income Minnesotans. We support efforts to make our tax system more fair, and the Working Family Credit helps us make that a reality. We hope that the House’s property tax reductions will show a similar focus on these Minnesotans.

    New spending: The House’s recommendations include supplemental funding in several areas of the state budget, including:

    • $172 million for economic development, including bonding, broadband expansion in Greater Minnesota, and affordable housing.
    • $92 million in education, including early childhood, K-12, school lunches, and higher education.
    • $75 million for health and human services.
    • $50 million for transportation.

    ‘Bottom Line’: The House leaves $195 million unallocated – or “on the bottom line” – to “ensure a stable budget into the future.” That means these funds would be available when policymakers set the next two-year budget in the 2015 Legislative Session.

    It is not the same as formally allocating those dollars to the budget reserve, although both create a cushion against future risk.

    You might remember that the Governor released his supplemental budget last week. Here’s how the House priorities compare:

    Taxes

    New Spending

    Budget Reserve or Bottom Line

    Governor’s Supplemental Budget

    $613 million

    $164 million

    $456 million (reserves)

    House Budget Targets

    $550 million

    $488 million

    $195 million (bottom line)

  • Governor Dayton’s supplemental budget sets his tax and budget priorities

    by Clark Biegler and Nan Madden | Mar 06, 2014

    Governor Dayton today released the outline of his supplemental budget, which proposes $616 million in tax cuts, $455 million more for the state’s budget reserves and $162 million in new spending.

    Pie chart governor's supplemental budgetThe supplemental budget describes the Governor’s proposed changes to the two-year state budget passed last year. We’re looking forward to seeing the details, but here’s our initial take: We applaud the continued focus on making the tax system work better for low- and moderate-income families, and attention to building more robust reserves. But our concerns include the size of the tax package, and we would like to see more of the surplus go to meet the needs of those Minnesotans who have not yet benefited from the economic recovery.

    Taxes: The Governor’s tax proposal includes changes in a number of areas, including:

    • Federal conformity items, including improving the Working Family Credit, addressing the ‘marriage penalty’ faced by non-itemizers and several other items.
    • ‘B2B repeal,’ or the elimination of three business-related sales taxes. (The combination of income tax reductions through federal conformity and B2B repeal is similar to House File 1777, up for a vote in the House today.)
    • Other tax reductions for middle-income Minnesotans, including an expansion of tax benefits related to child care that would benefit 170,000 Minnesota families.
    • Tax reductions for businesses and investors, including a $15 million increase in the Angel Investor Tax Credit.
    • Sales tax reductions for local governments that are working collaboratively.
    • Eliminating the gift tax and cutting the estate tax.

    We strongly support those components of the Governor’s tax package that make our tax system work better for low- and moderate-income Minnesotans, such as improving the Working Family Credit. Low- and moderate-income Minnesotans still pay a higher percentage of their incomes in state and local taxes than the highest-income Minnesotans.

    However, one item of concern is the estate and gift tax component. We are pleased that Governor Dayton’s proposal to cut the estate tax is smaller than some other options put forward. But a closer look is needed at the long-term costs and the impact on the tax system, given that the estate tax is the most progressive component of the tax code.

    Another concern is that the tax cutting proposal is too big. Recent history teaches us that when the state goes too far in tax cutting during the good times, it makes the bad times worse. It contributes to larger deficits when the next economic downturn comes, and makes it harder to meet the needs of struggling Minnesotans.

    Reserves: The Governor’s recommendation to add $455 million to the budget reserves takes a big step toward building our ability to respond to the next economic downturn. Minnesota has filled the budget reserves to the level required by current law: $661 million in the budget reserve and $350 million in the cash flow account. However, Minnesota Management and Budget recommends that the state have $1.9 billion in its reserves. The Governor’s recommendation would bring the reserves and cash flow account to nearly $1.5 billion.

    New spending: The Governor’s supplemental budget also funds a small number of what he terms “essential expenditures.” This includes additional funding for heating assistance, school lunches, and a rate increase for home and community based service providers. He also includes increases for the Department of Corrections, MnSCU, and the University of Minnesota. We appreciate that the supplemental budget includes some funding to meet the needs of Minnesotans struggling to make ends meet, and hope Governor Dayton will be open to other such proposals this session. For example, there are more than 8,000 Minnesota families on waiting lists for child care assistance – a crucial way to support parents in the workplace.

    -Clark Biegler and Nan Madden

  • Our top five for 2014

    by Barb Brady | Mar 04, 2014

    The 2014 Legislative Session may only last a few months, but policymakers should make the most of that time with decisions that move Minnesota closer to a future where everyone has the opportunity to succeed and share in our state’s economic prosperity.

    Policymakers can move toward that goal by building on the tax and budget choices made in the 2013 Legislative Session that made the state’s tax system fairer and raised new  revenues to invest in our economic future.

    Here are our top five actions that policymakers can take to build a strong future for all Minnesotans:

    • Expand access to affordable, quality health care for more Minnesotans by preserving MinnesotaCare, developing opportunities for Minnesotans without health insurance, and reducing racial health disparities.
    • Increase Minnesota’s minimum wage.
    • Improve the Working Family Tax Credit.
    • Pursue fairness and sustainability in Minnesota’s tax system, including avoiding large tax cuts that put at risk the state’s ability to fund its priorities.
    • Make responsible budget choices that include building more adequate reserves and including the impact of inflation in the state’s economic forecasts.

    You can see our entire policy agenda and analyses on our website.

  • National experts warn: Caution is the right approach to state ‘surpluses’

    by Nan Madden | Jan 28, 2014

    When the November forecast brought news of a projected surplus, we welcomed that good news. But we encouraged policymakers to act cautiously, to keep revenues strong, continue efforts for a fair tax system, and strengthen state budget reserves to make sure Minnesota stays on a solid track.

    In a recent blog, Michael Leachman of the Center on Budget and Policy Priorities similarly notes that Caution is the Right Approach to State “Surpluses.” He reminds us that states frequently have surpluses when coming out of a recession, and makes the point that:

    • A surplus means the state has more money than it expected, not necessarily more money than it needs.
    • Recovery from the Great Recession remains fragile.
    • Tax cuts are a lousy way to grow a state’s economy.

    It’s great that Minnesota’s economy is growing, and that stronger economic growth is reflected in a projected surplus. But it’s an initial step as Minnesota gets back on its feet.

    We’ve already taken some steps to put Minnesota in a stronger, more stable financial situation, such as using recent surpluses to reverse past budget gimmicks. But we can do more.

    We should build up our reserves so we’re better prepared for the inevitable ‘rainy days’ to come.

    We should use some of the surplus to strengthen our economy and make the state a better place to live. The fact that there are more than 7,000 Minnesota families on waiting lists for child care assistance, for example, is a clear indication that there’s more to do to support our workforce as we come out of the recession.

    And we shouldn’t pass large tax cuts that risk the state’s ability to fund our priorities. I’ve been doing tax and budget work since the mid-1990s, so I’ve seen what happens when we get too anxious as a state to start cutting taxes. It makes the next economic downturn harder. It makes the state consider cuts to services that help meet people’s most basic needs, such as Meals on Wheels.

    We don’t need to stand still on tax policy this year, but we should concentrate on making our system fairer and work better. Updating the Working Family Credit to match federal improvements fits both those criteria. Doing so would address marriage penalties faced by some working Minnesotans and make the tax system simpler. And it does so at a very modest cost.

    The positive budget situation creates the opportunity in the 2014 Legislative Session to build on last year’s progress. But policymakers should be cautious, and make budget decisions that will make us stronger down the road.

    -Nan Madden

  • Minnesota one step closer to fully reversing school funding shifts

    by Christina Wessel | Oct 02, 2013

    Many of us may have missed a piece of good news this week, amid major events like MNsure launching and the federal government shutting down: Minnesota is significantly closer to repaying the funding owed to our schools.

    On Monday, Minnesota Management and Budget closed the books on FY 2013 (which ended on June 30) and announced a $636 million positive balance in the general fund. The additional revenue is the result of both higher than expected tax collections and lower than expected spending.

    Due to a provision passed during the 2013 Legislative Session, the entire $636 million will go to reversing the school funding shift. The money will start flowing to schools by mid-October.

    The $636 million takes us very close to fully repaying our schools. The state still has $238 million to go. According to state law, the first priority for any future positive balance is to finish paying off the shift. That means if the state’s November 2013 Economic Forecast shows any additional good news, the first $238 million of any positive balance will go to school districts.

    -Christina Wessel

  • Happy New (Fiscal) Year!

    by Barb Brady | Jul 01, 2013

    Today's a big day for Minnesota - it's the start of the new fiscal year.

    Many elements of the state's budget for FY 2014-15 go into effect July 1, beginning a new era of investments in Minnesota's future prosperity.

    The new state budget gets Minnesota back on track after more than a decade of deficits, gimmicks and steep cuts to essential services.

    The budget gives all Minnesotans a reason to celebrate:

    • Children will see increased investments in their schools, particularly in early education, helping all students get a solid start.
    • College students will find their education is more affordable.
    • More people who are looking for jobs will receive the training they need.
    • More families without health insurance will get access to affordable, quality health care.
    • Renters and homeowners will receive higher property tax refunds.
    • And Minnesotans will pay a fairer share of their income in taxes, narrowing the gap between what high-income households pay and what other Minnesotans pay.

    This budget takes a remarkable U-turn from budgets of the last decade, where drastic cuts to critical services and decisions that undermined the state's financial stability caused long-term harm to the entire state.

    This change was no accident. It was the result of policymakers agreeing the time was right to stop the cycle of budget deficits and quick fixes, and make long-overdue investments in the state's future. Groups including the Minnesota Budget Project successfully advocated for fairly raised revenues and investing in critical services.

    The FY 2014-15 budget will take Minnesota a long way down the road to prosperity - and it all begins today.

    You can find more information in our Choices in the 2013 Legislative Session Take Minnesota in a Better Direction analysis.

  • E-12 omnibus budget bill invests in all-day kindergarten and narrowing the achievement gap

    by Clark Biegler | May 24, 2013

    The E-12 education final omnibus bill (House File 630) for FY 2014-15 makes important investments toward ensuring that all Minnesota students receive a top education and addressing Minnesota's racial achievement gap. The final bill increases E-12 education funding by $485 million in the FY 2014-15 biennium.

    The final budget increases funding for schools through the basic student formula by 1.5 percent each year in the E-12 education bill and includes additional equalization revenue for districts through the omnibus tax bill (House File 677).

    Not all students have the same opportunities, and students of color in the state have not performed as well as white Minnesota students on reading and math proficiency tests. So closing this racial achievement gap means making investments early and getting children on the right path from the beginning. The final bill attempts to do this through a few key proposals:

    • Free full-day kindergarten available for all children starting in FY 2015.
    • Early learning scholarships so high-need children ages 3 to 5 can attend high-quality early childhood programs, an increase of $40 million.

    The E-12 education omnibus bills also invests in children as they move through school by funding such provisions as:

    • Minnesota Math Corps to help elementary and middle school students meet state standards.
    • Regional Centers of Excellence to help schools increase achievement rates.
    • Special education.
    • Career and technical aid.

    The omnibus education bill also supports lifelong learning opportunities by increasing funding for Adult Basic Education to help Minnesotans with such things as their GED, English as a second language, and workplace literacy.

    Originally, the House proposed to fully repay the school funding shifts, but the final bill directs any positive balance at the end of FY 2013 to go toward the shifts, in addition to current requirements to use positive balances in future forecasts.

    The House bill originally included additional funding for Head Start to offset losses due to federal sequestration, and the Senate bill included increased funds for the Minnesota Reading Corps. These proposals, however, did not make it out of conference committee.

    The E-12 education omnibus budget bill makes strong investments toward ensuring all children can reach their full potential, a crucial piece in building a high-quality workforce and our future economic success.

  • Jobs, economic development and housing budget bill makes important investments in our state

    by Clark Biegler | May 21, 2013

    As the 2013 Legislative Session closes, the final budget bills have been passed by the House and Senate. Last week the omnibus jobs, economic development and housing bill (House File 729) received its final vote in both houses, investing $89 million in additional general fund resources to strengthen the state's economy by creating jobs, increasing workforce training opportunities and improving affordable housing options.

    Economic Development
    The conference committee agreement follows Governor Dayton's recommendation for providing loans and grants to local governments and businesses through the Minnesota Investment Fund and the Minnesota Job Creation Fund, investing an additional $54 million in these funds in FY 2014-15. The goal of these funds is to create between 12,500 and 15,000 new jobs in the state. The agreement also includes a one-time $1 million grant for economic development and job creation in an economically depressed area of the state and a one-time $6 million increase to a program that helps redevelop areas for various economic development purposes.

    The plan increases funding for workforce and business development grants to nonprofit organizations and other entities by $1.8 million in FY 2014-15. The bill opens up most of the grants to a competitive process, where organizations must apply for funding. The final bill also directs $2 million in additional resources to services that help individuals with mental illnesses or significant disabilities maintain employment.

    Also included is an unemployment insurance tax rate reduction for businesses, following the Governor's budget recommendation. The reduction will mean a savings of $57 million for businesses over the next two years, while keeping the unemployment insurance fund solvent.

    Housing
    Stable and affordable housing is important for attracting and keeping a high-quality workforce. In support of this goal, the Housing Challenge Fund, which builds rental housing in support of economic development, will receive over $4 million in additional funding in FY 2014-15. A new Housing and Job Growth Initiative, which builds affordable housing in areas of the state with job growth, will receive $10 million.

    The final bill also makes additional investments in the Housing Trust Fund, which focuses on providing rental assistance. The agreement increases overall funding for the fund, but also targets rental assistance to stabilize housing for children whose families move frequently, ex-offenders reintegrating into the workforce, and a demonstration grant for high-risk adults.

    Other housing investments include:

    • Family homelessness prevention;
    • Rental assistance for individuals with a serious mental illness;
    • Rental rehabilitation throughout the state;
    • Weatherization assistance to improve the energy efficiency of homes for low-income families.

    However, not all valuable investments made the final cut. For example, there is no additional funding for Job Skills Partnership, which works with businesses and educational institutions to train Minnesotans to meet needs in the labor market; or additional affordable rental housing for low-income families throughout Minnesota.

    The final omnibus economic development and housing bill takes important and timely steps forward in supporting job growth and developing a strong workforce.