Agreement between Governor Dayton and Legislature cuts transit by $54 million

Details of the agreement between Governor Dayton and the Legislature on funding transportation emerged Monday afternoon. The bill includes more than $54 million in reductions to mass transit in the Twin Cities and Greater Minnesota. While this level of cuts is far below the $118 million proposed by the Legislature, the Governor’s budget had proposed no reductions in funding for transit.

The transportation bill cuts general fund support for transit in the Twin Cities metro area by $52 million, a 40 percent reduction in FY 2012-13. Suburban transit providers that have “opted-out” of the Metro Transit system will also see a cut of approximately $7 million for the biennium. This overall level of cuts is significantly less than the 84 percent cut approved by the Legislature in May (and vetoed by the Governor). The agreement backfills some of these cuts to transit operations by redirecting revenues from a quarter-cent regional sales tax away from the construction and operation of rail and bus rapid transit projects. The Metropolitan Council has said they will also use reserves and federal funds to maintain current levels of service.

The transportation bill also cuts funding for transit operations in Greater Minnesota by about $3 million, an eight percent reduction. Once again, the reduction is less than the 23 percent cut approved by the Legislature, but will still have an impact in area where there are already few transportation alternatives.

The agreement makes no cuts to funding for commuter and passenger rail through the Department of Transportation. The Legislature eliminated this funding in its budget, which would have represented a loss of $1 million in FY 2012-13.

One new proposal showed up in the bill – $127 million in additional funding from the trunk highway fund for the Better Roads for a Better Minnesota program, which is aimed at repairing roads in poor condition.

Transit is a basic public service, getting people to and from work and school and other destinations, and reducing congestion and pollution. While the transportation bill has softened the blow to transit, transit authorities will still be diverting resources from other projects to maintain current operations. If we fail to make critical investments today in our transportation infrastructure, tens of thousands of Minnesotans – seniors, individuals with disabilities, working adults and students - are likely to find it a little harder to get where they need to go in the future.

-Christina Wessel

Legislature makes a budget offer

On Thursday, the legislature presented an offer to Governor Dayton that withdraws $203 million in tax cuts and slightly backs off of spending cuts in some areas. The major elements of the offer include:

• Withdrawing the $203 million in tax cuts contained in their tax bill, including gradually eliminating the state property tax paid by businesses and cabins, a corporate tax cut and conforming to a number of federal tax changes.
• Increasing funding for K-12 education by $80 million above the conference committee target, including $10 million for early education scholarships. This would match the Governor’s spending target in his March budget proposal. However, the additional funding appears to be contingent on the Governor accepting a number of controversial provisions, including shifting integration aid away from core cities, limiting collective bargaining rights, and instituting a new teacher and principal evaluation system.
• Reducing proposed cuts to higher education by $50 million. The legislature still leaves $361 million in cuts to higher education in FY 2012-13, $190 million more than the Governor.
• Reducing proposed cuts to the environment and energy by $13 million. The budget proposals from the legislature and Governor would still differ by a significant margin.
• Reducing proposed cuts to public safety and the judiciary by $30 million, bringing the legislature closer to the Governor’s proposed increase in base funding for this area.
• Providing $9 million for flood and disaster relief.
• Reducing proposed cuts to tax aids and credits by $20 million, which would not make much of a dent in the $925 million in proposed cuts in aids to cities and counties and property tax refunds for low- and moderate-income renters, which are expected to result in increased property taxes.

The legislature’s offer doesn’t include any changes in the funding targets for health and human services, transit, jobs and economic development, or state government. The offer “expires” at 5:00 p.m. on Monday, June 20.

Governor Dayton expressed disappointment with the offer, suggesting that it didn’t show real movement on the part of the legislature.

-Christina Wessel

A tale of two visions: Mass transit

The visions presented by Governor Dayton and legislature for mass transit in Minnesota could not be more different. The legislature cuts general fund support for transportation by $118 million, or 65 percent, with nearly all of these cuts falling on transit services in both the metro area and Greater Minnesota. The Governor, who does not propose any cuts to transit, labeled the legislative proposal as “draconian” in his veto letter.

Transit is a basic public service, getting people to and from work and school, and reducing congestion and pollution. Public transit helps the downtown office commuter avoid rush-hour headaches and high parking fees, but it is essential for those who either can’t afford a car or who can’t drive. More than 100,000 people – seniors, students and working adults – depend on transit every day just in the metro area.

The legislature reduces state support for Metro Transit by 84 percent in FY 2012-13. According to the Governor’s veto letter, the reduced funding could mean an across-the-board fare hike of 50 cents and a 30 percent reduction in service. The combination of fare increases and service reductions could result in a 31 percent decline in ridership and the layoff of 610 Metro Transit employees. Many families would feel the impact of the cuts in their daily lives since sixty percent of metro area transit riders are using the bus or rail to get to work. To reduce the impact of the cuts, the legislature allows the Metropolitan Council to transfer money from other funds, including the Livable Communities fund that funds affordable housing and economic development.

Several suburban areas have separate bus systems that have “opted-out” of the Metro Transit system. The legislature’s budget keeps funding flat at 2011 levels for these transit systems.

The legislature cuts funding for transit in Greater Minnesota by more than $7 million, or 23 percent. These cuts are expected to result in 101,000 fewer hours of service each year, a 10 percent reduction. Since there are usually few transportation alternatives for individuals living outside of the metro area, any reduction in service will have a significant impact. Although the legislature prohibits reductions in special transit services for the elderly and disabled, the loss of mainstream services will still negatively impact these populations.

Department of Transportation funding for commuter and passenger rail is also eliminated in the legislature’s budget, a loss of $1 million in FY 2012-13. This will make it difficult to accept and manage federal funding for existing and future rail projects.

The Governor and legislature propose dramatically different visions for mass transit services in Minnesota. The final deal will have serious implications for tens of thousands of Minnesotans who depend on bus and rail for everyday activities like getting to work, attending school, accessing medical care or going grocery shopping.

-Christina Wessel

Cuts-only approach jeopardizes the economic self-sufficiency of rural families in need of transportation assistance

Today, Way Nine of the 20 Ways in 20 Days Campaign looks at how a cuts-only approach to meeting Minnesota’s needs will jeopardize the economic self-sufficiency of rural families in need of transportation assistance.

Proposed Cut: The Senate has proposed the elimination of the Minnesota Community Action Grant, resulting in the loss of community services to promote economic self-sufficiency including transportation assistance for rural families.

Consequence: For many people, lack of a reliable way to get to work is one of the greatest barriers to getting and keeping a good job, especially in rural areas where public transportation often is hard to access or even non-existent. Heartland Community Action works in partnership with local government agencies, nonprofits, churches and communities across southwestern Minnesota to help people get to work by reconditioning and distributing donated vehicles to families in need. One recipient said, the vehicle was “a stepping stone and offered me hope.”

Every one of the 52 families that have received vehicles to-date reported they were able to obtain or keep employment as a result. And three-fourths of those families no longer need income assistance. That’s a winning investment. But proposed cuts threaten to eliminate Community Action services like these. That would leave many southwestern Minnesota families without a way to get to work and jeopardize their ability to support themselves.

Solution: Let’s protect Minnesota’s communities, residents and quality of life. We cannot afford to take a cuts-only approach to meeting our state’s needs, jeopardizing the economic self-sufficiency of rural families in need of transportation assistance. Minnesotans know we need a balanced approach, one that includes raising revenues based on ability to pay, in order to maintain critical state services that support Minnesotans in tough times and invest in our future.

• For more information about cuts that jeopardize the economic self-sufficiency of rural families, contact Debi Brandt with Heartland Community Action Agency at 320-235-0850, ext. 1124.
• For more information about the 20 Ways in 20 Days Campaign or Invest in Minnesota, contact Leah Gardner at 651-757-3063.
• Download the PDF version of this story to spread the word about the impact of proposed budget cuts.

-Leah Gardner

House plan derails transit, Senate proposes lesser cuts

Transit is a basic public service, getting people to and from work and school, and reducing congestion and pollution. Public transit helps the downtown office commuter avoid rush-hour headaches and high parking fees, but it is particularly important for those who either can’t afford a car or who can’t drive.

The House (House File 1140) and Senate (Senate File 898) propose significant cuts to transportation. The Senate cuts general fund spending by $41 million from base funding for FY 2012-13, a 23 percent reduction. The House goes much further, cutting transportation spending by $138 million in FY 2012-13, or 77 percent of general fund spending. And all of these cuts fall on mass transit. The general fund accounts for just three percent of all transportation spending – and nearly 90 percent of that general fund money goes to transit. Most funding for transportation comes from other funding sources, such as the gas tax or federal highway funding.

The Senate proposal cuts general fund spending for Metro Transit by $32 million in FY 2012-13, a 25 percent reduction. The Senate also cuts $8 million from transit in Greater Minnesota, but fills in that cut with an $8 million transfer from a fund that supports suburban area transit providers. The end result is a $40 million cut to transit in the metro area.

The House cuts are even more dramatic, eliminating all general fund support for Metro Transit in FY 2012-13, a $130 million reduction. The House also cuts nearly $8 million from Greater Minnesota transit (a 23 percent cut) and eliminates all of the Department of Transportation’s general fund money for commuter and passenger rail.

The Governor’s supplemental budget proposes no transit cuts.

The challenge for transit is that these cuts come on top of other budget pressures.

• Public transit also depends on funding from the motor vehicle sales tax (MVST). MVST revenues have fairly consistently come in below projected levels in recent years. This leaves transit officials concerned that future revenues will also come up short.
• Public transit is facing the same challenges every car owner is facing – rising fuel prices. The Met Council, which operates metro area transit services, says an increase of 10 cents a gallon increases their fuel costs by $760,000 a year.
• Further, metro area transit ridership is increasing and new projects, such as the I-35W Bus Rapid Transit, will lead to increases in operating costs.

To minimize service cuts and fare increases, the House and Senate allows the Met Council, which operates Metro Transit, to use money from other sources. However, those actions will take funding from other needs.

• Both the House and Senate allow the Met Council to transfer money from the Metropolitan Livable Communities Fund, which provides grants to help communities redevelop polluted lands, create jobs and develop affordable housing.
• Both allow the Met Council to use Right-of-way Acquisition Loan Fund (RALF) money for transit, which means there would be fewer resources available to purchase future road right-of-way lands that otherwise could be lost to development.
• The Senate directs the Met Council to use “the maximum feasible amount” of its reserves to pay for bus operations.
• The House would allow the Met Council to accept a transfer from the Counties Transportation Improvement Board (CTIB), a group of metro counties that joined together to support rail and bus rapid transit with a 0.25 percent sales tax. But that is not an easy path. CTIB would have to initiate the transfer, and county voters would have to approve it. Transit for Livable Communities has pointed out that such a CTIB transfer would indefinitely delay several transit projects and could jeopardize the Central Corridor rail project.

The Met Council responded to the House bill by describing possible scenarios for dealing with the proposed $130 million in cuts. One option is for Metro Transit to increase fares by $4, bringing the cost to between $5.75 and $7.00 per ride. The fare increase would trigger a 50 to 60 percent loss in ridership. Another alternative is a service cut approach, where Metro Transit would raise fares by $0.25 cents, but cut nearly 45 percent of the regular routes, including 240 rush-hour bus trips. The Senate directs Metro Transit to use reserves and make transfers from other accounts (as mentioned above) before it can cut services or increase fares.

Deep cuts to public transit will have an impact on many Minnesotans. Proposed transit cuts will disproportionately hurt those of lesser means, who will struggle most with higher fares and reductions in services. Although the House prohibits service cuts to Metro Mobility, which serves individuals with disabilities, this vulnerable community would still be impacted by the budget cuts to mainstream transit services.

Not only will struggling families feel the impact, but so will the state’s economy. Eighty percent of metro area transit riders use the bus or rail to get to work or school. Increases in fares and reductions in service will also create more pressure for people to drive, making an already congested road system worse.

-Scott Russell

Governor Dayton revises budget in response to new deficit numbers

Governor Dayton acted quickly on Monday and released preliminary changes to his budget proposal to reflect the newly released February Forecast, which showed the deficit had shrunk to $5.0 billion. His preliminary list of changes takes advantage of the $1.2 billion improvement in the state’s budget situation to reduce tax increases on the wealthiest Minnesotans and restore cuts to services for some of the most vulnerable.

The largest element of his revised budget proposal is to drop the temporary additional three percent tax rate on taxable incomes above $500,000. That proposal would have raised $918 million in total during the three years it would have been in effect (2011 to 2013).

The next most significant element of the Governor’s revised budget is restoring approximately $200 million in funding for health and human services. His changes include:

• Withdrawing proposals that would eliminate funding for Community Action agencies and significantly reduce funding for Emergency General Assistance.
• Withdrawing his proposal to eliminate MinnesotaCare eligibility for adults over 200 percent of the federal poverty guidelines.
• Withdrawing proposals to cut county funding for child support enforcement and cut $12 million from congregate living rates.
• Reducing the level of cuts to the Child and Community Services Act (CCSA), the Minnesota Family Investment Program (MFIP), and nursing homes and home and community-based services.
• Loosening the caps on waiver programs for persons with disabilities.

The Governor’s preliminary list of changes also withdraws $14 million in proposed cuts to transit in the metro area and Greater Minnesota and adds $20 million in various business development incentives.

A complete revised budget proposal will be released by Minnesota Management and Budget in the coming days. In addition to more details on the items included in this preliminary list of changes, the revised budget will also reflect any other changes to the Governor’s budget proposal resulting from new information in the February forecast (often referred to as “repricing”).

-Christina Wessel

Cuts to transit could lead to fare increases, reduced service

Mass transit is an essential means of transportation asset for many, both in the metro area and in Greater Minnesota. According to Transit for Livable Communities (TLC), 60 percent of metro area riders are using transit to get to work, and transit also acts as a “lifeline for low-income households and people who can’t drive, including the state’s growing elderly population.”

The Governor’s budget proposal includes permanent cuts for mass transit, including nearly $11 million (or nine percent) in general fund reductions for mass transit in the metropolitan area and another $3 million (or eight percent) in reductions to transit in Greater Minnesota. Other sources of funding for transit, such as federal resources and Motor Vehicle Sales Tax (MVST) revenues, are also unstable, leading to significant concerns for future transit funding.

In order to minimize reductions in service levels in the metro area, the Governor’s proposal suggests the Metropolitan Council could consider an across-the-board fare increase of 25 cents for bus and rail transit effective January 1, 2012, raising more than $9 million over the biennium. However, metro area fares were increased in 2008, and now rank in the top 25 percent in the nation, according to the Star Tribune.

In Greater Minnesota, the Department of Transportation estimates that the transit cuts are equal to 23,000 hours of bus service.

-Scott Russell

OMB issues initial guidance on American Recovery and Reinvestment Act

Office of Management and Budget (OMB) Director Peter Orszag has sent a pretty detailed memo to all federal departments and agencies involved in the disbursement of funds from the newly-enacted American Recovery and Reinvestment Act (ARRA). The 62-page memo explains the Obama Administration’s expectations of federal departments and agencies and also offers advice on how to meet the new standards. If you are an organization thinking about applying for some of these resources or a person wondering about transparency and accountability, you’ll want to page through the memo.

According to Director Orszag’s memo:

• Funds are to be awarded and distributed in a “prompt, fair and reasonable manner;”
• Use of federal funds is to occur in a transparent manner and the public benefits of the funding are to be reported “clearly, accurately and in a timely manner;”
• Unnecessary delays and cost overruns are to be avoided;
• Program goals are to be achieved, including “specific program outcomes and improved results on broader economic indicators.”

The Administration is clearly sensitive to the opponents of the package who argued in Congress that it would not be possible to accurately track how much money was being spent and what results were being achieved (such as how many jobs were either being retained or created). Expect more memos as the federal dollars in the legislation begin to flow to states, counties, cities, contractors and individuals in the weeks and months ahead.

In the meantime, you should also check out Recovery.gov, a clearinghouse for information on the ARRA.

-Steve Francisco

Transportation finally has its day

Last week I filled you in on the revenue increases included in the transportation bill working its way quickly through the legislature. Here’s an update with the final revenue elements of the bill that was approved on Monday after the House and Senate succeeded in overriding the Governor’s veto. More details are available on the web.

First, two items to highlight:

Low-income motor fuels tax credit. The bill provides a $25 refundable income tax credit for individuals and families in the state’s lowest income tax bracket (in 2009, income limits are estimated to be $32,720 of taxable income for married filing jointly and $22,390 for single filers). The House also added an amendment that requires individuals to be a U.S. citizen or lawfully present in the US in order to be eligible for the credit. Since the gas tax is regressive, we think it’s a positive sign that policymakers included a mechanism to try to lessen the impact on low-income families.

Dedication of motor vehicle lease sales tax adds to General Fund deficit. The bill increases the fee on vehicle rentals and short-term leases from 3 to 5 percent of the sales price. Revenue from this sales tax is gradually redirected away from the general fund - first to pay for the low-income tax credit, and the remainder to transit, roads and streets. With the state facing a $935 million deficit, it’s unfortunate that the funds to pay for the low-income credit come at the expense of the general fund - the total loss to the general fund will be about $68 million in the 2010-11 biennium.

The other provisions:

Gas tax. A 2 cent increase in the gas tax is effective April 1 and another 3 cent increase is effective October 1. There is also a gas tax surcharge to pay back trunk highway bonds. This will phase in starting on August 1 with a half cent, increasing up to a cap of 3.5 cents.

Motor vehicle registration. The bill eliminates the cap on the motor vehicle registration tax (“tabs”), but accelerates the depreciation schedule. People will not see an increase in their tabs on their previously registered vehicles.

Local option sales tax. Allows counties in the seven-county metropolitan area to impose a 0.25 percent sales tax and a $20 excise tax on vehicles sales. No referendum is required and the funds are directed to transit projects. In Greater Minnesota, counties could impose a tax of up to 0.5 percent and a $20 excise tax on vehicles sales. The increase would require a voter referendum and funds would go to a specific project.

-Christina Wessel

Transportation bill speeding through Legislature

See my update on the transportation bill! 

I’ve been tracking the transportation bill through the House (HF 2800) and Senate (SF 2521). This isn’t a comprehensive analysis, but here are the major revenue components which together would raise several hundred million dollars each year for our state’s transportation needs:

• A 2 cent increase in the gas tax effective (roughly) the first day of the month after enactment and another 3 cent increase as of September 1, 2008.
• A surcharge on the gas tax (capped at 3.5 cents) to recover debt service needed to repay trunk highway bonds.
• Eliminates the cap on the motor vehicle registration tax, but accelerates the depreciation schedule. People will not see an increase in their tabs on their previously registered vehicles.
• Provides a $25 refundable income tax credit for individuals and families in the state’s lowest income tax bracket (in 2009 income limits are estimated to be $32,720 of taxable income for married filing jointly and $22,390 for single filers).
• Increases the fee on vehicle rentals and short-term leases from 3 to 5 percent of sales price. Gradually redirects the motor vehicle lease sales tax away from the General Fund. The funds are first used to pay for the low-income tax credit, then the remainder is distributed with 50% going to Greater Minnesota transit, 25% to metro area transit, 17.25% to county state-aid highway fund and 7.75% to municipal state-aid street fund.
• Allows counties in the metropolitan transportation area (I think potentially 18 counties) to opt-in by resolution of the county board to a half-cent sales tax increase and an excise tax of $20 per vehicle (decreases to 0.25% after June 30, 2028). The funds would be used 50% for transit, 25% for trunk highways or local roads of regional significance and the remaining for any purpose (including up to 5% for pedestrian programs, bicycle programs and pathways). This provision will expire October 2, 2008 unless at least one county in the 7-county metro area imposes the tax.
• Allows any county outside of the metropolitan transportation area to impose the half-cent sales tax and $20 motor vehicle excise tax if approved at a general election referendum. The funds raised would be dedicated exclusively to covering the costs of a specific transportation project or improvement and the tax would terminate oncde the project was completed. (The Senate amended the bill this morning to say “up to” a half-cent tax increase.)

The bill also originally indexed the gas tax to inflation beginning July 1, 2010, but this provision was removed as part of a compromise.

-Christina Wessel