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House GOP proposal sets up showdown with Dayton over budget

In outlining their proposed $39.9 billion state budget for the next two years, Minnesota House Republicans answered one obvious question Tuesday: How do you cut taxes by $2 billion while increasing spending on things like education, long-term care and public safety — when you only have a surplus of $1.87 billion?

Answer: By nixing programs enacted by recent DFL Legislatures, cutting down on some “political” expenses like reimbursements for legislators, and going after people receiving Medical Assistance who make too much money to be eligible for the program.

The budget proposed by the GOP leadership of the House is a far cry from the one DFL Gov. Mark Dayton has proposed, and it sets up a mid-session showdown over the numbers.

Dayton created his proposal off of a different “base” budget number than Republicans. Officials in Minnesota Management and Budget, the state’s budgeting agency, say the costs of all current state programs will go up from about $39.3 billion in the 2014-2015 fiscal year to $41.1 billion for the next two years (a number that is not adjusted for inflation).

Overall spending, 2016–17: Projected, GOP and Governor’s proposals
The GOP proposed state spending at $39.949 billion for the 2016–17, a level lower than the projected budget with no changes to current law and Gov. Mark Dayton's budget proposal.
Source: Minnesota Management and Budget and Minnesota GOP

Dayton used the latter projection as the baseline for his budget, and proposed to spend nearly every penny of the $1.87 billion surplus on things like childcare tax credits, pre-kindergarten education and college tuition freezes.

Republicans in control of the lower chamber, however, used the last two-year budget as the baseline to create their proposal. Republican Speaker of the House Kurt Daudt went as far as to say the budget size is a “fictitious” number, because spending increases were built in through programs passed by an all-DFL controlled government over the last two years.

Yes, the state’s constitution requires that lawmakers leave session with a balanced budget, Daudt said, but it also prevents one Legislature from binding the actions of the next. In other words, there’s no reason spending increases passed during the last legislative session have to continue. “This seems to be one of the things that’s very confusing [to Minnesotans] about what we do here,” Daudt told reporters. “Democrats didn’t do our homework for us; we can’t just all go home.”

All of which means there’s a nearly $3 billion gap between the Republicans' budget and that of the governor. “[That] just shows you how much of an enormous increase in spending Gov. Dayton is proposing,” said Rep. Jim Knoblach, R-St. Cloud, the chair of the House Ways and Means Committee. (To make things even more complicated, the Democrats in control of the state Senate will release the outlines of their budget proposal on Friday.)

Not surprisingly, Democrats like House Minority Leader Paul Thissen are firing back, calling Republicans' numbers bogus. “With a $2 billion surplus,” Thissen said, “it is unacceptable that Republicans would cut Minnesota workers and our most vulnerable by $1 billion.”

Crunching the numbers in the Republican budget has been complicated, largely because the big reveal was light on details: most spending, tax cuts and budget cuts will have to be figured out in the committee process over the next few weeks.

While Daudt said it’s unlikely tax cuts will come in the form of rebate checks, as lawmakers did in the late 1990s, he isn’t sure exactly how they will target the $2 billion in tax relief. Some will go to businesses, he said, and most members look favorably on eliminating taxes on social security income, but the rest of the details will have to be worked out in the Tax Committee.

2016–17 spending by category: Projected, GOP and Governor’s proposals
The GOP’s smaller 2016–17 budget is achieved primarily with a significant cut to the Health and Human Services budget.

*The number reported for the GOP budget is for "E-12 Education", the current name of the House committee, while the numbers for the projection and the governor’s budget are taken from the "K-12 Education" line in the February forecast, so the numbers might not be exactly comparable.

Source: Minnesota Management and Budget and Minnesota GOP

On the spending side, Republicans have a long list of things they say need more funding:

  • They want to put $100 million more into higher education, but it’s unclear how that money would be spent
  • Republicans want to spend an extra $200 million on pre-K-to-high school education
  • They want to give $160 million to nursing homes and other workers who care for the elderly and disabled
  • Property tax relief programs and aid that goes directly to cities and counties will also go up, though the total amounts will be determined in committees  
  • Public safety would get a $100 million funding boost
  • The state’s so-called rainy day fund would get $100 million under the GOP budget plan

The GOP’s budget plan also didn’t include a recently announced Road and Bridge Act of 2015 that they say will pump $7 billion into roads and bridges over the next decade.

Still, some DFL legislators on the Ways and Means Committee expressed concern that Republicans math doesn’t add up, particularly in the area of health and human services. “I just don’t know if you are going to find all the cuts you need there,” said Rep. Tina Liebling, DFL-Rochester.

In creating their budget from scratch, Republicans have done something else that’s fairly unprecedented: They left $319 million in “yet-to-be-allocated funds” in their targets. That money could go into a budget reserve or be spent on other priorities, but it could serve as a cushion if they have a hard time finding $1 billion in cuts.

“We are leaving an unprecedented amount of money on the bottom line, which we can carry over into the next year or we can use it in the next 30 days once we firm some things up,” Knoblach said. “This gives us some additional flexibility if we need it.”

How to spend $43 billion
One area where everyone agrees: the state is expected to have $42.996 billion to spend in 2016–17 (after subtracting mandatory budget reserves). But the GOP and the governor get there in distinct ways: the governor's proposal focuses almost entirely on increased program spending across a number of administrative departments, with a small tax cut aimed at child care and school supply purchases. The GOP proposal cuts spending by state departments and creates a $2 billion tax cut, $612 million one-time spending on roads (part of their larger transportation funding proposal), $100 million increase in budget reserves, and leaves $319 million to be determined.

*The deficiency bill is $15 million in emergency spending for 2015 on the Minnesota Zoo, the St. Peter Security Hospital, Ebola preparedness and other areas. It was agreed to as part of the compromise on commissioner pay raises.

Source: Minnesota Management and Budget and Minnesota GOP

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Comments (13)

  1. Submitted by Ray Schoch on 03/25/2015 - 12:56 pm.

    Do your homework, legislators

    Since money dominates this society just as it dominates other industrial societies, the arguments that are about to begin over the budget will be, in large part, comparing apples and oranges. Both sides have to be using the same numbers for critiques and solutions to make sense, and if I’m reading this correctly, both sides are NOT using the same numbers.

    ‘Twould seem that Republicans are using a different set of numbers and assumptions than are DFLers. I’m pretty sure that’s because their own numbers suit the policy proclivities of Republican legislators better, though that doesn’t guarantee that the numbers Republicans are using are, in fact, somehow “better” than the numbers used by the DFL. It doesn’t automatically make them wrong, either. The point is, as long as the power structures are using different numbers and assumptions to begin with, all the fire and brimstone hurled back and forth is little more than political theater.

    I know it’s asking an awful lot to request that legislators think and behave responsibly, but one of the ways they could demonstrate that they’re grownups and not overly-large 3-year-olds would be to do what’s necessary – whether that involves rules changes or actual legislation – to require any sort of formal budget proposal by either political party to begin with the same assumptions and figures. Yes, doing so will significantly reduce the drama and headlines in both the PiPress and the ‘Strib, but public entertainment, while often provided by state government, is not its overarching reason for being.

    If MMB numbers are, in fact, off by some significant factor (one of which would a failure to account at all for inflation), then require MMB to revise its bean-counting procedures so that the result is as accurate as is humanly, and reasonably, possible. Adults ought to be able to do something like that without too much prodding. My vague recollection of the GOP decision to create its own numbers was that it had almost nothing to do with inaccuracy on the part of MMB, but instead allowed the GOP to build its ideology into its budget. That seems to be what’s happening, with the bulk of the proposed GOP cuts in services and programs falling on the shoulders of those in the lower reaches of the economy, while providing other cuts – tax cuts – to people who are fine without them.

    Them that has, gets. Them that don’t don’t.

  2. Submitted by Lora Jones on 03/25/2015 - 01:58 pm.

    “going after people receiving Medical Assistance who make too mu

    Good God! If the GOPers wanted to stop fraud, they should go after the Rick Scott’s of the world, not the recipients! I realize there was the recent case with (naturally) older, white and probably republican scammers getting public assistance, but in the grand scheme of things that’s small potatoes. They all need a lesson from whoever it was that said they robbed banks because that’s where the money was. Go after fraud by the HMOs and health care conglomerates — not people making $100 more than 138% of the poverty level!

    • Submitted by Tom Anderson on 03/25/2015 - 06:43 pm.

      The Legislative Auditor

      Just reported that HHS has been providing benefits to people who don’t qualify for them (again). Perhaps we can start there.

  3. Submitted by Donna Koren on 03/25/2015 - 02:59 pm.

    Inflation

    My recollection of when Minnesota state government stopped factoring in inflation on the expenditure side of budgeting: In 2002, when Pawlenty was leading the House, Moe was leading the Senate, and Ventura was Governor, they made an expedient decision to stop including inflation on the outlay side. Then Gov. Pawlenty instructed the Dept. of Finance (now MMB) to use this budget gimmick throughout his tenure; and it continues. So, this is not fault of the good budget analysts at MMB; it was a political decision which I’m sure chaffed them quite a bit. Politics put it in place; political leadership can reverse it.

  4. Submitted by Bill Willy on 03/25/2015 - 05:56 pm.

    Leader astray?

    The more I see and hear Kurt Daubt talk, the less I think anyone should think of him as qualified to lead ANYthing, let alone a big part of something that impacts millions of Minnesotan’s real life.

    This quote in particular is a good example of why I say that:

    “Republican Speaker of the House Kurt Daudt went as far as to say MMB’s budget projection is ‘fictitious.’”

    And therefore, Republicans, under his leadership, found it necessary to disregard the Minnesota Office of Management and Budget and – in their spare, non-legislative time – use their superior intellect, experience and expertise, their more complete data-sets, and their unique budget management skills and discipline – that they obviously believe to be more highly-developed than those posssesed and practiced by MMB’s dedicated full-time staff – to calculate the REAL costs of providing the services Minnesota voters have said they want.

    The result? An unpublished set of Republican Office of Management and Budget (RMB) projections and related “budget” no one can explain or understand because it has Big Missing Parts and Details “that will have to be worked out” in the kaleidoscope of House committee actions that will be taken “over the next few weeks” (good luck following that and finding those Big Missing Parts or understanding those “currently unavailable Details,” and how those things impact the overall “budget”).

    And that RMB projections-based plan is what? NOT fictitious?

    Funny how the Speaker had absolutely no doubt about the accuracy and integrity of MMB’s February 27th projection (and has embraced it like a long-lost Loved One – tightly – every chance he’s gotten, since it showed up):

    “Higher Revenues, Lower Spending Increase FY 2016-17 Balance to $1.869 Billion.”

    http://mn.gov/mmb/forecast/forecast/

    Nothing fictitious about that one at all!

    And then there’s this example of why I say no one should trust Kurt Duabt to lead as much as a scavenger hunt. While he’s certain “there’s plenty of room” for TWO BILLION DOLLARS-WORTH…

    “… he isn’t sure exactly how they will target the $2 billion in tax relief.”

    Basic Budgeting question: If you don’t know where tax cuts will be made, how can you include them – and their impact – in a budget?”

    I’m pretty sure he was first elected in 2010, and I imagine he campaigned on the certainty that this 2010 MMB projection was fictitious too, and if it wasn’t, how the Democrats, not tax cuts, were to blame:

    “Projected budget deficit in Minn. rises to $6.2 billion in 2012-2013”

    http://www.mprnews.org/story/2010/12/02/state-budget-forecast

    At the end of the week we’ll have two DFL representations of the wisest future path that are based on MMB’s best effort to provide the future fiscal facts.

    And we’ll have one Republican idea of the wisest way to go, based on the RMB’s best effort to provide their version of the future fiscal facts.

    And everyone in Minnesota that’s paying attention will have the opportunity to decide which set of ideas and plans look the least fictitious.

  5. Submitted by Michael Hess on 03/26/2015 - 12:00 am.

    overstatement

    You overstate the speakers Comment. As stated in the article the republicans subtracted back out some of the New DFL spending proposals so as to not automatically assume they continue into the next biennium. This doesn’t denigrate the work of the MMB. As another poster stated a common set of facts would make it easier to compare, and the official politically mandated lack of inflation adjustments in MMB projections is irritating and confusing. Let’s not add to that legitimate confusion additional mischaracterizations.

  6. Submitted by Bob Petersen on 03/26/2015 - 08:23 am.

    Instead of the people, why not look at the numbers?

    It seems that all everyone talks about is who has done what and who wants to do what…and from who is involved will drive their biases. How about just look at the dang numbers being proposed.
    The guv wants to increase spending by over 7% in the next two years above an already record amount of spending and added budget increases from the previous legislature. On top of that, the previous legislature and current guv added a record $2 billion tax increase. We currently have an almost $2 billion surplus with more projected surpluses in the future. The guv and Senate majority wants to spend the surplus on programs that will be permanent spending (surpluses are temporary) that will instantly eliminate projected surpluses and probably cause future legislatures to increase taxes again to maintain those programs.
    What the House majority is basically proposing is what they feel is best for the state by another budgeting option, less increases in permanent spending and having tax cuts because limiting the increase in spending will continue to give future legislatures surpluses.
    The question is, without naming names, what do you agree is the best for our state going forward. After all, the money belongs to all of us. It should be a pretty easy choice.

    • Submitted by Joel Stegner on 03/26/2015 - 05:40 pm.

      Sorry, all the money doesn’t belong to you.

      Of course, conservatives would like paying taxes to be optional, but they aren’t. The only question is how much and for what purposes. And what is the purpose of return any money to the taxpayers, when Republicans want to take back any money going to the poor and more through service cuts for essential services.

      This writer is correct that surpluses are temporary, which is why Dayton wants to put aside a sizeable chuck into the rainy day fund – rather than take out “loans” to pay for things – like Pawlenty did with Minnesota schools districts, holding back money that was owed them, forcing them to borrow money to meet their basic expenses, so he could claim he had balanced the budget and not based any taxes (forgetting the “health fee” he placed on tobacco smokers). That way when he have recession, we can handle it.

      Speaking about smoke, Republicans deal in smoke and mirrors (another word for lying to the public) with this budget. A billion of cuts from the poor in a time of prosperity to enrich many people who don’t do that – that is exactly what we can expect from conservatives – who are “me, me, me about everything. No surprise that they want crack down on the poor, than say a group like sunbirds who falsely claim to be Florida residents to avoid paying any Minnesota taxes. Just a pragmatic things – rich tax cheats tend to hold back a lot more taxes than any poor person that is getting government benefits they aren’t fully entitled to.

      And boy, isn’t it just terrible that someone who has a little bit too much money gets food stamps or health insurance. That is small potatoes compared to Republicans attempts to blow up the MN Care program – not Obamacare – something originally done on a bi-partisan basis. Minnesota is not a life raft or a sinking ship – we have enough life boats and life vests – and really, even if we were sinking like a lot of sates, prying the fingers of poor children from the their ability to survive and thrive. It is just plain immoral.

    • Submitted by Bill Willy on 03/26/2015 - 08:47 pm.

      Okay, Bob. Let’s forget people and look at numbers

      Here are the three numbers you referenced:

      7% (Governor’s spending);

      $2 billion (“previous legislature, current guv tax increase”); and

      $2 billion surplus.

      The big ones you didn’t mention are the $2 billion tax cut, the $1+ billion cut to Health and Human Services needed to pay for it, and the $300 million permanent cut to the General Fund to finance part of the “Transportation Stability Fund.”

      But rather than try to decipher the meaning and impact of the numbers in the article, here are some others that will shed a little light on what happened the last time a similar plan was hatched…

      Between 1997 and 2001, one-time tax rebates were enacted each year, at a total cost of $3.7 billion.

      A total of $1.0 billion in property tax rebates was enacted in 1997 and 1998.

      Those cuts were followed by a total of $2.7 billion of sales tax rebates enacted in 1999, 2000, and 2001.

      Permanent tax cuts were also enacted each year:

      Permanent property tax reductions were enacted in 1997, 1998, 1999, and 2001;

      Permanent income tax rate reductions were enacted in both 1999 and 2000; and

      Motor vehicle registration taxes were reduced in 1999.

      These permanent tax cuts have a fiscal impact that continues each year after they are enacted.

      http://www.house.leg.state.mn.us/fiscal/files/02taxcuts.pdf

      Now… As we all know – because conservatives have been telling us for years and years – tax cuts just like those result in

      – people and businesses keeping more of their money which leads to

      – more business

      – more jobs

      – more income, and

      – more tax revenue for the state which leads to

      – more tax cuts.

      That’s the way it works, right? And that’s why it’s good to look at the numbers, no? Because the numbers are the indisputable things that prove fiscal things, wouldn’t you say?

      So okay… Let’s take a look at some of the numbers that will give us a look at the fiscal reality in the years following the enactment of those tax cuts:

      For the current biennium (2002-03), the projected deficit has grown by $336 million to reach $2.289 billion.

      $4.204 billion deficit in 2004-05 biennium. (Unlike past forecasts, estimated spending is not adjusted for the impact of inflation. If inflation were included, the deficit would be $1.1 billion larger, or $5.3 billion.)

      $441 million added to 2006-07 deficit

      $935 million deficit for the FY 2008-09 biennium.

      $1.2 billion budget deficit in two-year budget cycle, FY 2010-11.

      Compared to last November, the estimated FY 2012-13 deficit has grown from $5.4 billion to $5.8 billion. Adding in the cost of inflation, the deficit reaches $7 billion.

      http://www.mnbudgetproject.org/research-analysis/minnesota-budget/budget-outlook

      Dec 2, 2010

      Minnesota is facing a $6.2 billion deficit in the upcoming biennium, up from earlier projections of $5.8 billion. The shortfall represents about 16 percent of the state’s two-year budget.

      http://www.mprnews.org/story/2010/12/02/state-budget-forecast

      Huh… What do you suppose happened to all the money that was going to flow into the state’s bank account when those tax cuts unleashed businesses and the economy?

      Let’s take a look at the Minnesota unemployment rates (on January first) from 2000 to this year, so we can see what the Job Creators were able to do with all those tax savings, and how the massive Dayton/DFL tax increases impacted them:

      2000: 3.0%
      2001: 3.4%
      2002: 4.5%
      2003: 4.5%
      2004: 4.9%
      2005: 4.2%
      2006: 4.1%
      2007: 4.4%
      2008: 4.7%
      2009: 7.1%
      2010: 7.7%
      2011: 6.8%
      2012: 5.7%
      2013: 5.2%
      2014: 4.5%
      2015: 3.7%

      http://www.davemanuel.com/historical-state-unemployment-rates.php

      That’s funny… It looks like the Job Creators went backwards on their hiring until the year AFTER their taxes went through the roof. How could THAT be?

      Okay… Let’s forget the state’s extended lack of income and whatever misfires the Job Creators experienced for the 10 or 12 years following those tax cuts (same thing could’ve happened to anybody).

      Let’s move on and take a look at what the tax cuts did for some of the hard working Minnesota families Speaker Daubt and Majority Leader Peppin have been talking about so much lately…

      2005: 6,000
      2006: 12,000
      2007: 20,000
      2008: 26,000
      2009: 23,000
      2010: 25,000
      2011: 21,000
      2012: 18,000
      2013: 12,000

      That’s the number of Minnesota families and individuals that lost their homes to foreclosure from 2005 to 2013… But hey. That’s only two to four times the rate before the tax cuts. And it’s only 160,000-some homes. And 40,000 to 60,000 or so of them probably would’ve been lost anyway. So that’s not that big a deal in the overall scheme of things. Unless you happen to have been in one of the families that used to live in one of them, of course. But that wasn’t any (or many) of the people that benefited most from those tax cuts, so it’s just another one of those unfortunate things we’ll have to forget.

      http://www.housinglink.org/Files/ForeclosuresInMN_2013_Annual.pdf

      Most important of all, NONE of those things or numbers is any reason NOT to cut taxes by $2 billion, right?

      We should do it because everyone knows that’s the only way to grow the economy, create new jobs and get more money flowing into the state so we can cut more taxes.

      And while I realize there’s no such thing as enough tax cutting for some folks, and no such thing as a DFL tax cut, it may be good to remember that there were $1 billion in tax cuts last year that benefited most taxpayers in the state.

      And one last thing… Anyone who thinks those $2 billion in tax cuts would “be returned to the hardworking taxpaying families of Minnesota” is dreaming. I would recommend anyone that believes that do a quick read of House File 1 (the Crown Jewel), paying particular attention to ARTICLE 3: TAX PROVISIONS… Talk about numbers! You’ll find it here:

      https://www.revisor.mn.gov/bills/text.php?number=HF1&version=0&session=ls89&session_year=2015&session_number=0

    • Submitted by John Appelen on 03/27/2015 - 01:07 pm.

      Good Point

      Bob,
      I agree with you, however the DFL has a plan. They want to increase the spend to what we can just afford in “good times”, then when a recession occurs they will use the deficit as a justification for needing to raise taxes on the upper middle class and wealthy, and/or they will accuse the GOP of proposing “draconian cuts” on the poor.

      Their system seems pretty consistent in the USA.
      http://graphics8.nytimes.com/images/2013/01/16/us/politics/16fivethirtyeight-gov4/16fivethirtyeight-gov4-blog480.jpg

      I think of it like the conveyor on a roller coaster, the cars can only go up as the mechanical stops only allow motion in one direction. We went from 10% to 20% to 30% to 38% of GDP, I wonder how much more our society can take.

      • Submitted by Dennis Wagner on 03/27/2015 - 09:00 pm.

        Hello JA

        We have been out here before.
        You are a great proponent of value, we agree, now however comes the tough question:
        The question to be answered is: Do you believe the government can do anything better than private enterprise? i.e provide better value for our tax $?
        Would we be better off (more cost efficient’/better value with a private highway system?
        Take the same question:
        Department of Natural resources?
        Department of Justice?
        Department of Health?
        Licensing?
        Economics?
        Revenue generation?
        House of Representative?
        Senate?
        etc.
        We know, that everyone is looking so!
        Point is clear which ones can we privatize and do more cost effectively, provide examples, and of course without corruption, and whom will provide over site? And what will that cost. and how will that insure that we are ~ 100% perfect? As expected of our Government(s)
        Thanks, look forward to the response

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