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Minnesota Budget Bites: Governor’s current budget offer relies on one-time measures and deep cuts in services

On Thursday, policymakers took a significant step in the ongoing discussion of how Minnesota will meet its needs over the next two years. At stake are decisions that will have a profound impact on the state’s future quality of life and economic vitality.

On Thursday morning, Governor Dayton announced an offer that increases the size of the shift in payments to school districts, borrows $700 million from the future through tobacco bonds, and reduces funding for vital public services by more than $2 billion. Late Thursday afternoon, legislative leaders accepted this basic framework. Here are the major elements:

  • $1.4 billion in savings by continuing the current shift in state payments to school districts. Normally, the state pays school districts 90 percent of their annual aid in one fiscal year, and a 10 percent settling-up payment in the following fiscal year. In the 2010 Legislative Session, policymakers changed the formula to a 70/30 percent split to help reduce the state’s budget deficit by shifting the payments into the FY 2012-13 biennium. The Governor and Legislature have agreed from the beginning of the session to delay repaying school districts into the future.
  • $700 million in additional savings by increasing the shift in payments to school districts, going from a 70/30 split to a 60/40 percent split. 
  • $700 million by issuing tobacco bonds that would sell off future tobacco payments in return for a lump sum payment today. We recently blogged on our many concerns with this one-time source of revenue, which borrows from the future.

That leaves $2.2 billion in spending reductions. The details of these cuts have not been agreed to by the Governor and legislative leaders. However, earlier in July, Governor Dayton released a document that sheds some light on how more than $2 billion in cuts could be distributed among the areas of the state budget:

The one detail in the Governor’s offer is that these spending reductions cannot include the Legislature’s proposal to decrease the state government workforce by 15 percent by 2015. If you are looking for more information on the potential impact of $2 billion in cuts, our recent analysis of the Governor’s and Legislature’s budget proposals discusses the cuts that were on the table during the legislative session. 

The Governor’s offer also calls for a $500 million bonding bill, and specifies that the final budget deal would not include either the Governor’s tax proposals or the Legislature’s policy proposals.

Legislative leaders and the Governor are now working out the details of the agreement. The Governor could call a special session as early as next Monday or Tuesday so lawmakers can vote on the compromise.

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Comments (6)

  1. Submitted by Bert Perry on 07/15/2011 - 08:48 am.

    Keep in mind here that the 34.2 billion being spent in the next biennium (+/-) is actually over a three billion dollar increase over the 31 billion dollars the state actually spent of its own revenues in the previous biennium. The trick with Governor Dayton’s proposal is that he was more or less assuming that the stimulus (or spendumore) plan money received ought to form a new baseline for spending–without that stimulus money coming on an ongoing basis.

    Now consider where your personal finances would be if you treated every windfall as “part of the ordinary budget”, and assumed that you “needed” to be spending every dime of what you had received in a windfall year. You would be bankrupt.

    Which is exactly why the GOP, thank God, stood against Governor Dayton’s tax hike proposals. At a certain point, people who can do math and accounting are going to realize that the government treats them as sheep to be shorn, and are going to seek greener pastures–states like Texas, Florida, and Tennessee. By the way, guess where most of the jobs created since the bottom of the recession were created? I’ll give you a hint; head down I-35 and say hi to Governor Perry.

  2. Submitted by Clayton Haapala on 07/15/2011 - 09:46 am.

    If you can do math, tell us why does the GOP budget borrow a like sum from our children today (school shifts) and our children tomorrow (tobacco fund bonding)?

  3. Submitted by mary jane manion on 07/15/2011 - 10:58 am.

    You know that thing about turning MN into TX? Well, when I was in Tx for 2 months this winter, I noticed a thing or two that doesn’t ever hit the R blogs. It seems they have this $28 billion state deficit, and are having many wrangles over the limited water supply and infrastructure, what with T Boon Pickens owning the aquifer. The sky darkens and rains soot from the burning of crop residue. The residents continue to live in uninsulated shacks and the schools continue to struggle to meet the educational needs of the public school children. There certainly is lots and lots of building going on, that is for sure. But also lots and lots of shuttered businesses as well. I guess I thought it was in everyone’s interest to educate children, give them clean air to breath and clean water to drink. With no one giving a thought to climate change maybe we will find out what it is like to be TX, with or without Republican legislators.

  4. Submitted by Ann Richards on 07/15/2011 - 02:08 pm.

    The last Dr that many Texans saw was TVs Dr Oz, Texas has the highest rate of growing uninsured. How many times do you think that Dr Oz is willing to go back and provide free health service to Texans, working Texans by the way who could not afford insurance- those minimum wage jobs just don’t allow for extras like insurance. Texans have oil. We don’t -get over it. As a state they made choices about how they spend money. Most MN residents don’t want to be a Texas.

    How many more jobless and elderly do you think we added since the budget 2 years ago? Those GOP you thank God for just added to our future woes, why?

  5. Submitted by Richard Schulze on 07/15/2011 - 03:05 pm.

    @ Bert
    Explain the math and how it differs from taxing to pay for government and borrowing to pay for government.

  6. Submitted by Bert Perry on 07/18/2011 - 08:52 am.

    Clayton, Richard; being able to do math, I have realized that $35.4 billion is less than the $37 billion Dayton wanted to spend. While I am less than pleased that the budget went beyond $34 billion, and am well aware that borrowing is not a good idea, either, I am pleased that the legislature managed to hold the line against Dayton’s proposals to spend $39 billion and $37 billion.

    One thing I’d like to know, personally, is why government spending always seems to grow far faster than GDP. I’ve been around a while, and I don’t remember roads and schools falling apart when I was a kid, when the government was spending far less. Why is it that building roads, schools, and such takes so much more money today?

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