Robust tax collections allow state to release $63 million for school safety grants, Metro Mobility and disaster relief funding

Minnesota budget officials have formally released $63 million to three state programs, allocations that were contingent on the state having enough in reserves by October 1.

In a letter to legislative leaders Thursday, Minnesota Management and Budget Commissioner Myron Frans announced that the money would be released for school safety grants; expanding the Metro Mobility program for the elderly and disabled; and to refill the disaster relief account.

All three were the last items funded when Gov. Tim Walz and House and Senate leaders reached various agreements to adopt the 2019-21 state budget and adjourn the session with a one-day special session. Under the agreement, only if state tax collections exceeded the forecast by at least $63 million between February and the end of June would the money be released from state accounts.

They did.

“This letter is to notify you that the FY 2019 closing balance will exceed $605.604 million by at least $63 million and that each of the above contingent appropriations will be funded,” wrote MMB Commissioner Frans. The transfers include $20 million to the disaster contingency account; $13 million for the Met Council’s Metro Mobility program; and $30 million for safe schools supplemental aid.

But the House budget had no additional money for districts, and the surplus in the state budget means that “at the end of the day, it is being appropriated,” said Nelson. 

The initial school safety grants required schools to apply for the money, and could only be used for capital spending: hardened entries, resistant glass and doors, security systems. The new pot of money will go to all schools, with awards based on student enrollment, and can be used for personnel such as counselors and safety officers.

The contingency funding strategy came out of the final budget deal negotiated in private by Walz, House Speaker Melissa Hortman and Senate Majority Leader Paul Gazelka at the close of the 2019 Legislature. One desire of budgeters 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 was released, and budget writers were pretty confident that the cash would be there. Making the appropriations contingent on the ending fund balance allowed for that number to show up at just over $600 million.

Another reason for caution was that MMB wanted to be sure that the more robust tax 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 that could have shifted collections to different months.

At least three times in the last three budgets have 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.