Surplus offers hope for Minnesota schools and communities

December 1, 2011

Nobody expected this morning’s good news – that the State of Minnesota is projecting an $876 million surplus for the current two-year budget cycle (FY 2012-13). This gives the state the chance to take positive steps toward keeping our promise to our kids and protecting vital investments in our economy.

While it’s nice to have good news for a change, it is short-lived. The November 2011 Economic Forecast projects a $1.3 billion shortfall for the next budget cycle (the FY 2014-15 biennium), or $2.6 billion if we include the impact of inflation. So policymakers must be careful how they use these one-time resources. In the face of serious economic hard times in the last few years, lawmakers have depleted most of the state’s rainy day resources and resorted to significant borrowing, including from our schools. The best thing we can do is to start reversing some of those actions.

Fortunately, that is exactly what will happen with this surplus. As required by state law, the first $255 million of the projected surplus will be used to refill the state’s cash flow account and the remaining $621 million will go to refilling the state’s budget reserve close to its target of $653 million.

That is good news for Minnesota’s schools, because it brings us closer to making good on the state’s promise to pay back what it borrowed from our schools. After the state’s cash flow and budget reserves are refilled, by law, any future surplus will be used to start buying back the school payment shift.

Unfortunately, the slow economic recovery means the state is projected to face deficits again. Using the current surplus to rebuild our rainy day funds will allow us to avoid deep cuts to areas vital to our future economic success – like education and training for Minnesotans of all ages.

Decisions being made at the federal level pose an additional threat for Minnesota’s economic future. The November Forecast assumes that Congress will extend the payroll tax cut and unemployment insurance benefits that expire at the end of this year. If Congress fails to do so, we face the serious risk of another national recession. Furthermore, federal deficit reduction could result in the loss of federal funding for health care, education, and other community services are the critical for Minnesota’s future prosperity.

Although some may float the idea of using the surplus for other purposes, policymakers will be wise to stay the course and refill our rainy day funds to position us to weather the storms on the horizon.

You can get all the details on the November Forecast on the Minnesota Management and Budget website.

-Christina Wessel


Join letter to Congress opposing Balanced Budget Amendment to Constitution

July 13, 2011

The fierce debate in Washington over how to reduce federal budget deficits has taken a dangerous new turn. Both the U.S. House and Senate are poised to vote as early as the week of July 18 on a Balanced Budget Amendment (BBA) to the U.S. Constitution that takes a one-sided approach to reducing federal budget deficits that would require dramatic reductions in critical services and do great economic damage.

The Minnesota Budget Project supports a responsible and balanced approach to federal deficit reduction that does not undermine the fragile economic recovery, that is equally divided between spending reductions and increases in revenue, and that does not increase poverty or inequality.

The proposed BBA would cap total federal spending at 18 percent of Gross Domestic Product (GDP), far below the 2010 level of 24 percent of GDP. Within a decade, the BBA could lead to a 70 percent reduction in funding for affordable housing, education, child care, Head Start, public health, veterans’ health care, environmental protection, health research, food and water safety, and more. For example, this hard spending cap would require cuts even deeper than those in the Ryan budget that passed the House in April, which slashes more than $1.5 trillion from health care through Medicaid and the Children’s Health Insurance Program (CHIP) over ten years.

The amendment would also require that any measure to raise revenues, increase the debt ceiling, or waive the balanced budget requirement be adopted by a supermajority vote in both the House and Senate. These severe restrictions would cause significant harm to the current fragile economic recovery and would make future recessions both deeper and longer by essentially tying the hands of the federal government’s ability to respond.

The Center on Budget and Policy Priorities is seeking organizations to join a sign-on letter to Congress opposing the Balanced Budget Amendment. The deadline to join the letter is Thursday, July 14. Time is short, so please join the Minnesota Budget Project and over 200 other organizations in asking Congress not to pass the BBA.

-Steve Francisco

Let high-income tax cuts expire, redirect money to stimulate economy

September 2, 2010

The Center on Budget and Policy Priorities makes a strong case for letting $40 billion in Bush tax cuts for high-income households expire as scheduled at the end of this year. That $40 billion could instead be redirected to help stimulate the weak national economy.

According to the nonpartisan Congressional Budget Office (CBO), if this money were used for job-creation tax credits, continued federal aid to states and extended unemployment insurance benefits, it would create more jobs and generate more economic growth than simply extending the Bush tax cuts for the top income households in the nation (i.e., those with incomes over $250,000 a year). Why? Because higher income households are more likely to save this extended tax windfall than spend it. What the economy needs right now, however, is more consumer spending.

In fact, “CBO found extending the tax cuts for high-income households to be the worst of all options under consideration for preserving or creating jobs and boosting economic growth while the economic is weak,” the Center on Budget and Policy Priorities notes.

In the near term, the CBO found that some actions would create more economic growth and more jobs per dollar spent than extending the high-income tax cuts. For example:

  • A temporary jobs tax credit (a temporary payroll reduction on new hires).
  • Extending federal fiscal aid to states to help them avoid bigger and deeper spending cuts. (Congress in fact has recently taken this action, which may provide $430 million for health care and education in Minnesota.)
  • Extended unemployment insurance benefits for the unemployed. This provides the greatest “bang for the buck,” as benefits paid out to the unemployed would undoubtedly be injected right back into the local economy in spending by the unemployed to meet basic living needs.

When Congress returns from its summer recess in September, expect a fierce debate over the future of the expiring tax cuts (along with whether or not Congress will extend tax credits targeted to low- and moderate-income working families, such as the Child Tax Credit and the Earned Income Tax Credit). Extending the tax cuts for high-income households is the worst option for spurring economic growth, and would add $1 trillion to the national debt over the next ten years. Congress should allow the Bush tax cuts to expire. In the short-term, Congress should redirect that money toward initiatives that will truly stimulate the economy and help struggling working families. Once the nation’s economy is on more solid footing, the resources can be used to make a dent in the nation’s deficit.

-Steve Francisco

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Failure to address climate change harms vulnerable populations

July 27, 2010

Last Thursday, U. S. Senate Majority leader Harry Reid announced that he did not have the 60 votes necessary to pass major climate change legislation. This was very disappointing news for those working to pass comprehensive, equitable legislation to address climate change. It is expected that Congress will instead push through a series of smaller bills focused on addressing liability and safety issues related to the BP oil spill and potentially some other less comprehensive energy efficiency and clean energy measures.

This is a loss not only for our environment, but also for low-income populations and people of color. The failure to pass comprehensive climate change legislations means: 

  • Those who disproportionately bear the negative effects of climate change will continue to be in harm’s way. To learn more about what this means, read how the Red Cross is already working to help vulnerable populations prepare for extreme weather events caused by climate change.
  • The anticipated piece-by-piece legislation to address climate change will not provide a revenue stream for funding priorities like consumer relief from energy price increases, training for green jobs for those traditionally without equitable access to livable wage jobs, and dedicated funds to help nonprofits and low-income households afford efficiency improvements and reduce their energy consumption.

This is an important moment for you to speak up on behalf of disadvantaged populations. Let Minnesota’s congressional delegation know that you are paying attention and are disappointed that Congress failed to pass comprehensive climate change legislation at this critical time.

  •  If your representative in the U.S. House voted in support of The Clean Energy Jobs and American Power Act (Congresswoman McCollum and Congressmen Ellison, Oberstar, Peterson and Walz), thank them for supporting comprehensive climate legislation and ask them to continue working for viable solutions that consider the impacts on vulnerable populations.
  • If your representative in the U.S. House voted against The Clean Energy Jobs and American Power Act (Congresswoman Bachmann and Congressmen Kline and Paulsen), let them know that you are disappointed in their vote and the failure of Congress to address climate change as a serious issue that will continue to bring harm to our environment and to vulnerable populations.
  • Tell Senators Franken and Klobuchar that you are disappointed in the U. S. Senate’s inability to pass comprehensive climate change legislation, but that you appreciate their willingness to champion climate equity issues. Ask them to keep fighting for solutions to climate change that consider the impacts on vulnerable populations.

Find out who represents you and call their offices today! For more information on climate change and implications for vulnerable populations, visit the Minnesota Budget Project Climate Change Resource Page.

-Leah Gardner

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Recovery Act has brought $2.6 billion to Minnesotans

July 9, 2010

Minnesotans have received approximately $2.6 billion in direct federal assistance from February 2009 through May 2010 as a result of the American Recovery and Reinvestment Act (ARRA), according to the Center on Budget and Policy Priorities. The direct assistance was provided through increased benefits for existing federal programs, through new tax credits and through direct cash payments. The collective impact of this direct assistance has been to put additional income into Minnesotans’ pockets to help struggling working families avoid falling into poverty and to save jobs in our local economy through increased consumer spending. Most economists agree that increased consumer spending is the key to a sustained economic recovery.

Here’s a breakdown of how much direct assistance has been received by Minnesotans through tax credits or direct cash assistance through May 2010 thanks to the Recovery Act:

1. Making Work Pay Tax Credit – $1.4 billion for Minnesotans. The Recovery Act created a new refundable tax credit equal to 6.2 percent of a worker’s earned income in 2009 and 2010. The vast majority of wage earners will benefit from this tax credit, receiving a maximum credit of $400 for an individual or $800 for a married couple. Individuals earning over $75,000 or married couples earning over $150,000 receive a smaller credit. No tax credit is available to individuals earning over $95,000 or married couples earning over $190,000.

2.  Food Stamps $109 million for Minnesotans. The Recovery Act provided a nearly 14 percent temporary increase in the maximum Food Stamp benefit. This translated into the average participating household getting $40 to $50 more each month beginning in April 2009. Also, the time limit on how long childless adults could receive Food Stamps was suspended.

3. Unemployment Insurance (UI) Benefits – $232 million for Minnesotans. The Recovery Act temporarily increased the regular Unemployment Insurance benefit by $25 per week.

4. Extended Unemployment Compensation (EUC)- $672 million for Minnesotans. The Recovery Act , as well as other legislative action, provided additional weeks of unemployment benefits to people who would otherwise have exhausted their benefits. 

5. $250 Economic Recovery Payments – $212 million for Minnesotans. The Recovery Act included a one-time payment of $250 to anyone receiving Social Security, Supplemental Security Income (SSI), Railroad Retirement or disabled veterans’ benefits. This one-time payment was distributed mostly in May 2009.

While we have a long way to go to return to a robust, vibrant and growing economy here in Minnesota, consider how much worse off many Minnesotans and our economy would be today if not for the $2.6 billion in tax credits and direct assistance made possible by the Recovery Act. The money is flowing to struggling families and individuals who spend it in our communities, helping to spur economic recovery.

To keep the economy on the right track, Congress should extend additional aid to individuals (such as by extending  Unemployment Insurance benefits) and to states (such as through the extension of the enhanced federal matching rate for Medicaid). One point seems clear: the federal government has a powerful and significant role to play in helping struggling Minnesotans survive the continuing economic recession.

-Steve Francisco

Congress considers whether to extend additional health care funding to states

June 3, 2010

Congress is considering whether to provide states with additional funding for health care, helping state governments at a time when most are facing budget shortfalls and considering reductions in health care and services. Unfortunately, the opportunity to protect access to health care for many Minnesotans may be slipping away.

Last week, Democratic leaders in the U.S. House of Representatives agreed to strip out a key provision extending the enhanced federal matching rate for Medicaid, known as FMAP, from a larger bill to extend unemployment insurance. (A provision extending subsidies that help the unemployed maintain their health care coverage through COBRA was also dropped from the bill). That bill passed the House last Friday and awaits Senate action as early as the week of June 7th. A key question is whether Senate Majority Leader Harry Reid will agree to add the extension of federal aid to the states to the Senate version of the bill.

Last year, Congress passed the American Recovery and Reinvestment Act (ARRA), which temporarily increased the federal share of Minnesota’s Medicaid costs from the regular 50 percent up to roughly 60 percent. But this increased matching rate is set to expire at the end of this year. Extending the matching rate would bring Minnesota an estimated  $408 million, funding that could protect health care and other services as our state continues to face budget shortfalls.

The focus now shifts to the U.S. Senate, which is expected to take up the Unemployment Insurance extension bill when it returns to session the week of June 7th.

It is highly unlikely that Congress would pass a separate bill to extend federal aid to states for Medicaid and so the extension of aid must be included in some other “must pass” bill, such as the bill to extend expiring Unemployment Insurance benefits.

Both of Minnesota’s U.S. senators have been supportive of extending the federal aid to states for Medicaid. Senator Franken has been particularly outspoken about the need to extend additional aid to the states and cosponsored a separate bill. Hopefully, the Senate will move quickly to add the extension of health care funding to the Unemployment Insurance bill when they return from their recess next week.

-Steve Francisco

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Join sign-on letter to Congress supporting Child Tax Credit, Earned Income Tax Credit

May 14, 2010

The Minnesota Budget Project is seeking organizations to join our sign-on letter to the Minnesota Congressional delegation in support of recent improvements to the Child Tax Credit and the Earned Income Tax Credit. Both of these tax credits are vital in helping low- and moderate-income Minnesota families make ends meet.

Last year, as part of the American Recovery and Reinvestment Act (ARRA), Congress made it easier for families to qualify for the Child Tax Credit. Approximately 156,000 Minnesota children have been helped by the improvements to the CTC, which brought an additional $126 million to Minnesota families. But unless Congress acts to extend these improvements, they will disappear at the end of this year.

Similarly, the Earned Income Tax Credit (EITC) now includes a new “third tier” that allows families with three or more children to receive a larger tax credit. There is also an improvement for some married couples. Approximately 102,000 Minnesota households have benefitted from these improvements to the EITC that have also brought an additional $51 million to Minnesota families. But again, unless Congress acts, these improvements will disappear at the end of 2010.

Congress will likely vote on extending a package of middle-income tax cuts some time in the next few months. It is important that our Minnesota Congressional delegation hear from you to urge them to also extend these improvements to the CTC and EITC that help low- and moderate-income working families. The deadline for joining our letter is noon on Friday, May 21.

-Steve Francisco

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