Lots of people — OK, some people — with an interest in Minnesota government pay close attention to the state’s monthly tax collection reports. Much of the business of the Legislature, after all, is about how to spend whatever state taxes bring in, and the monthly collections are an early indicator of whether they’re spending too much … or too little.
After the 2019 legislative session, however, those involved in three areas of the budget paid especially close attention to the numbers. That’s because in order for legislative leaders to reach a budget deal this year, the appropriations for those three areas were dependent on how much extra money came in during the first half of 2019.
And those programs aren’t insignificant. One is money for school safety grants; another is additional funds for Metro Mobility, the Twin Cities ride service for the elderly and disabled; the third is to help when natural disasters hit communities. In all, more than $63 million in appropriations were contingent on whether the state had extra money around at the end of its 2019 fiscal year, which closed on June 30.
While state accountants still have to reconcile the books, it appears all three areas of spending will get that money. Preliminary numbers indicate that the 2019 fiscal year ended with an additional $636 million that hadn’t been around in February when the last official forecast was released.
Once the books are closed — something that should be completed by early October — Minnesota Management and Budget Commissioner Myron Frans will likely be able to transfer $20 million into the disaster assistance account; $13 million into the Met Council’s Metro Mobility program; and $30 million to the commissioner of education for school safety projects.
Part of final budget deal
In a statement, Frans said the use of contingency appropriations isn’t common, but that it can be useful when negotiators are trying to finalize a state budget. “We recommend that they be used on a limited basis when there are indicators that revenues will likely exceed the February forecast for the end of the fiscal year and when there is a broad agreement to fund additional priorities for a balanced biennial budget,” Frans said.
At least three times in the last three budgets appropriations have been contingent on more money flowing into state accounts: When the 2017 fiscal year closing balance exceeded projections, $10 million was moved into the disaster contingency account; at the end of the 2015 budget year, extra tax collections allowed $63 million to be transferred to the closed landfill investment fund and $8 million to the metro landfill contingency action trust account; and when the February 2018 revenue forecast was positive, the Clean Water Fund received $22 million.
The latest use of the contingency funding came out of the final budget deal negotiated in private by Gov. Tim Walz, House Speaker Melissa Hortman and Senate Majority Leader Paul Gazelka at the close of the 2019 Legislature. One desire of budgeteers was to have a sizable ending fund balance — that is, the money left on the table to cover unexpected declines in tax collections once the budget was approved.
It wasn’t a complete roll of the dice. Tax collections have been healthy since the February forecast, so budget writers were confident that the money would eventually be there. But making the appropriations contingent on the ending fund balance allowed for the ending fund balance to show up at just over $600 million.
Rep. Lyndon Carlson, the Crystal DFLer who is chair of the House Ways and Means Committee, said he wasn’t in the room when the final budget deal was cut. But the shape of the negotiations had been set enough that he expected the three appropriations would be contingent on tax collections.
“There was a lot of concern that we have a balanced budget and we watch the bottom line,” Carlson said. “Those were three areas that everyone wanted to provide some funding for, but there was a certain level of caution.”
Another reason for caution was that MMB wanted to be sure that the healthier-than-forecast collections weren’t a blip caused by taxpayers paying earlier or later than in the past. The federal restriction on so-called SALT deductions (state and local taxes) also contributed to changing tax payment patterns.
“I feel pretty positive, quite frankly, with the $636 (million),” Carlson said. His counterpart in the Senate, Sen. Julie Rosen, R-Vernon Center, was vacationing and not available to be interviewed for this story.
‘Chances are we’re gong to have a disaster’
The Senate had initially provided money for disaster relief in an omnibus bill, but the $20 million set aside there would have been reduced if the ending fund balance fell below that amount, and would be zero if there was no balance.
The House DFL position had been to fund the disaster relief account directly and not be contingent on tax collections. In an interview just after the end of the regular and special sessions, Hortman said she and Walz gave in to the Senate GOP position, despite her worries regarding potential weather disasters.
“I mean, we had the eighth wettest spring in Minnesota history; chances are decent that we’re going to have a disaster,” said Hortman, a Brooklyn Park DFLer. “If something happens and the contingent appropriation doesn’t go through, we have to come in to address the disaster.”
The reason the fund exists is to avoid special sessions to respond to disasters, said Rep. Gene Pelowski, DFL-Winona. It was his district that was hit hard by heavy rains in 2007 and he has made disaster response something of a specialty, even giving presentations on the subject. “Southeastern Minnesota was hit by 15 inches of water in one night,” Pelowski said. “We had lost almost all bridges and roads in that area: miles of roads and bridges we still haven’t found.”
At the time, the Legislature met in special session to pay for relief efforts. Afterward, Pelowski worked to create a fund that could be tapped without needing lawmakers to return to St. Paul. But the account is funded by appropriation, which means it is filled sometimes and not filled at other times.
“That fund should have been funded straight up, it shouldn’t have been funded on contingency of whether another fund generates enough revenue. That’s a dangerous precedent that leads to special sessions,” he said.
“The worst way to deal with these disasters is in a special session.”
Funding lags for Metro Mobility, school safety grants
Last year, Metro Mobility provided 2.83 million rides for the 62,000 people who are eligible for the service across the Twin Cities metro, which represents a 30 percent increase in demand since 2013. The Metropolitan Council has seen more of its transit appropriation going toward the service, and the state budget now gives Metro Mobility a separate line item so that it doesn’t draw from regular bus service.
The budget as passed in May gives the service $80 million for the first year of the biennium, but only $57 million for the second year. While the contingent appropriation will help make up the difference, it will still only take the yearly total to $70 million; and no additional money was added to meet a legislative request to expand the service to Lakeville.
The school safety money came in response to deadly shootings around the country. The Legislature had placed some money in the 2018 capital budget — $25.6 million — but it wasn’t enough. In fact, lawmakers were told requests made by districts around the state totaled more than $255 million.
The House education spending bill had $24 million for school safety grants while the Senate’s education funding bill includes $30 million that could be used for physical security upgrades as well as for staff such as school counselors, psychologists and nurses.