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ENEWS: As State Budget Biennium Begins, Big Disappointments and a Few Bright Spots

Date Published: 07/11/2017

Author: Dane Smith

As State Budget Biennium Begins,
Big Disappointments and a Few Bright Spots

Overview of 2017 Legislature’s Impact, A Look Ahead      

Minnesota’s two-year budget period begins this month, amid a continuing dispute between the Governor and the Legislature over a handful of important tax and immigration provisions, and an impending court battle over the governor’s line-item veto of funding for the Legislature itself. But we know enough about all the major funding bills already signed into law by Gov. Mark Dayton to offer an overview of the 2017 legislative session and a look ahead at the impact.

Bottom line, we are disappointed.  Along with many of our partnering non-profit advocacy organizations that are focused on building a more equitable economy, we think the allocation of the projected $1.7 billion budget surplus was unfair and imprudent. 

Too much of that one-time surplus goes to permanent tax cuts, mostly benefiting higher-income households. It’s disappointing to see so much of the $650 million going to Minnesota’s most well off, when it could have served Minnesotans more broadly and as an investment in our economic future. We believe we continue to under-invest in our human capital and public infrastructure.
There were a few bright spots, from more dollars for early childhood development, to an ample bonding bill at last, to sustained funding for local birth-to-career education partnerships  There was progress on key priorities in our Minnesota Rural Equity Project.  Original House and Senate proposals for draconian cuts in foundational institutions _ from colleges, to human services, to transit systems _ were thwarted.  We know Growth & Justice had a positive impact on these outcomes.

In summary, we agree with veteran state Sen. Dick Cohen, a senior member on the Finance Committee with 40 years of legislative experience, who summed up the session in a recent op-ed thusly:  “With ongoing expenditures spent only as one-time money and accounting shifts, an uncertain economy, possible continued decreases in projected revenue, an unsustainable tax bill and a small budgetary balance in the future, it is quite possible, if not probable, that in two years we will face a significant deficit.” 

The Big Picture

The state’s total two- year general fund budget will increase from about $42 billion in 2016-17 to about $46 billion for 2018-19.  That sounds like a major increase, but a more important perspective is provided by adjusting for population growth, inflation factors for the main things that government provides (such as health-care), and annual growth in the state economy.  The “Price of Government,” (POG) a bottom-line statistical measurement that has been updated annually for almost 30 years under governors of all parties by the Minnesota Management and Budget office, calculates the percentage of our total personal income captured by state-local government taxes, fees and charges.  Contrary to claims that state and local governments are growing out of control, Minnesota’s official POG has been relatively stable, hovering between 15 percent to 16 percent for almost 20 years.  Below is a graphic from the North Star Policy Institute showing the Price of Government since 1991 and projections through 2021. The point is that our public sector _ our primary instrument in reducing inequality _ has been larger in the past and has room to grow.  Our economy performed very well in the 1990s when the POG was well above 16 percent. (For more detail, follow these links to an interesting debate between the North Star Policy Institute and the Center for Fiscal Excellence on the methodology used for the Price of Government.) 


                                                   Source: North Star Policy Institute

K-12 Education, Early Childhood, Career Pathways

The basic formula funding for public schools increases by 2 percent in each of the next two years, but many school districts are facing layoffs and budget troubles due to failures of local school levy referenda and increases in low-income and special needs students.  According to the most recent ranking of per-student education spending by Governing magazine, Minnesota ranks 18th   among the states, surprisingly low for a state often applauded for prioritizing education.  One of the brightest spots in the budget bills is an increase of almost $100 million for funding of both universal pre-kindergarten programs in public schools and scholarships for high-quality early childhood development for low-income parents.  Funding continues for reducing racial inequality in higher education outcomes and for “Career Pathway” models, but these efforts need to be expanded.  Growth & Justice will persist in advocacy for more investment in the earliest years and in workforce training that addresses an economy-threatening mismatch: too many skilled jobs going unfilled, too many people underemployed and unskilled.

Transportation and Transit

Despite overwhelming demand and consensus -– between business leaders,  Greater Minnesota roads-and-bridges  promoters, and metro area transit advocates  –– the Legislature failed once again to enact  a comprehensive long-term transportation  and transit funding package.  Opposition to  any form of general tax increase by anti-government and anti-transit factions in the House and Senate majorities remains a key obstacle. Original proposals to slash transit funding by 40 percent were defeated, thanks to vigorous opposition by Twin Cities chambers of commerce. We strongly agree with Minnesota’s leading CEOs, who took anti-metro and anti-transit forces to task in a recent op-ed making the business case for light-rail and transit investment.

In the end, the Legislature did come up with $300 million per biennium in new, ongoing funding, and an additional $300 million in one-time investment from the bonding bill.  This amount falls woefully short of the estimated $900 million current shortfall in transportation-transit investment.   We are members of the Transportation Forward coalition and embrace their statement that “Better transportation options are essential to growing jobs, spurring economic development, and improving quality of life across the state.” 

Environment and Renewable Energy

As our allies at Fresh Energy stated in their overview headline,  2017 was “bad for energy, but could have been worse.” Along with them we are concerned about at least three major provisions:  new fees on fully electric vehicles (a $75 annual surcharge), cuts in funding for workforce education programs that increase racial diversity in environmental careers, and cuts in solar cell manufacturing research at the U of M.  The Minnesota Environmental Partnership’s overview  flags delays in water cleanup efforts, a weakening of solar and energy efficiency standards, and limits on the Department of Natural Resource’s ability to protect wildlife from lead.  Nevertheless, we are encouraged by signs that past progress is paying off with increased investment by the private and non-profit sectors in renewable energy across the state.  An important sign of ideological consensus is the recent formation of the Minnesota Conservative Energy Forum, which promotes new private-sector investment in wind and solar and renewable energy.

Health, Economic Security and Poverty

Minnesota is bracing for an onslaught from Washington D.C. on the basic economic security safety net for  vulnerable households.  What happens next could  overwhelm Minnesota’s ability to protect and nurture its  poorest children and families, and the Legislature did  little to insulate us against this future shock.  Worse,  the Human Services budget was cut by almost a half-billion from  projected needs over the next two years.  In signing the  2017 human services bill, Gov. Dayton praised the  Legislature for some modest improvements in programs for  the Minnesota Security Hospital, for protecting seniors from abuse in nursing homes, and for retreating from original proposals to cut human services by even more. Despite bipartisan agreement that the state faces a crisis in child-care affordability, the Legislature failed to fully fund the Child Care Assistance Program, and it fell short in providing more for family home visiting for at-risk families and teen parents, a proven intervention.  The Legislature and Gov. Dayton earlier in the session agreed on a package of $300 million in emergency aid for aid for mostly middle-income families whose private-market health insurance premiums skyrocketed last year, but most observers regard that fix as a temporary band-aid, which will do nothing to move Minnesota toward affordable, high-quality health care for every resident. Meanwhile, the state is left with an emerging crisis in cost and access to dental care for a million Minnesotans who are on Medicaid and Minnesota Care, particularly in Greater Minnesota. We recommend detailed overviews of impacts on children and mental health that are available online from the Children’s Defense Fund, NAMI-MN, and the Minnesota Budget Project.

Our Minnesota Rural Equity Project Priorities

Early in the session, Growth & Justice and its partners in the Minnesota Rural Equity Project identified a  dozen specific common-sense  legislative appropriations and policies  that will help restore vitality and  reduce inequalities in Greater  Minnesota, some of which would benefit the Twin Cities metropolitan area as well. We and our partners were able to muster bi-partisan support for each, and all but two of the 12 priorities were at least partially funded, although few at the level we recommended.  The biggest victories were in early childhood investment and $117 million for water and wastewater infrastructure grant and loan programs. For more detail on how our priorities fared, see our project recap and graphic summary on our website.

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