State government budget chips away at funding

July 22, 2011

It’s not sexy, but the state government finance bill plays a key role in ensuring the wheels of government keep moving. Some of what’s funded in this bill include offices established by the state constitution, the Department of Revenue, Minnesota Management and Budget (MMB), and the departments of Military and Veterans Affairs. Many policy and budget decisions that affect all state agencies are also included in this budget – such as proposals that impact all state employees and the way state government operates.

Governor Dayton and the Legislature agreed to cut funding for the state government finance budget area by $8 million in FY 2012-13, a one percent reduction. However, the bill also anticipates $86 million in new revenue. (Combining the $8 million in cuts with the $86 million in revenue results in the $94 million in changes to state government that you may see reported elsewhere.) 

Some areas of state government are held harmless in the bill:

  • There are no cuts to the Department of Military Affairs and the Department of Veterans Affairs, which include funding for the Minnesota National Guard and veterans’ homes. In fact, there is $6 million in increased funding for these agencies, mostly to support veterans pursuing higher education.
  • The Secretary of State’s elections office sees no reductions because of a federal requirement to fund the Help America Vote Act. 
  • Much of the Department of Revenue budget is also protected because of requirements to maintain auditing and collections staff.

Protecting some areas of state government means deeper cuts to other agencies:

  • Most offices and agencies receive a five percent permanent reduction in funding. These include the Governor’s office, Legislature, Attorney General, State Auditor, Minnesota Management and Budget, the Councils of Color, the Humanities Center, the Campaign Finance Board, Explore Minnesota, and portions of the Secretary of State and Department of Revenue.
  • A few areas receive deeper cuts. The Science Museum of Minnesota and the Minnesota Arts Board both receive a 10 percent permanent reduction in their state funding. The Minnesota Historical Society receives a seven percent cut. 
  • Public television is cut by five percent, Minnesota Public Radio by 15 percent, and the Twin Cities Cable Channel loses all of its funding.

As mentioned earlier, the bill also includes two sources of new revenue. These proposals sparked controversy during the legislative session because the Legislature and Minnesota Management and Budget differed on how much revenue each would raise. In each case, the final agreement settles on a lower dollar figure:

  • The largest piece of revenue comes from adopting a legislative proposal to employ analytic and intelligence tools to identify businesses and individuals not paying taxes they owe. The bill estimates this will raise $82 million in the FY 2012-13 biennium (the Legislature estimated $133 million). After taking into account the cost of implementing this proposal, the bill anticipates a net $69 million in new revenue for the state.
  • The state will also enter into an agreement with the federal government to pursue debt collections, raising $4 million in FY 2012-13 (the Legislature estimated $37 million).

The state government bill contains a few new policies that could have important implications for how the state functions in the future:

  • A new Pay for Performance pilot program is established that would issue state appropriations bonds. Traditionally, bonds are used to pay for capital projects. In this case, the pilot program focuses on prevention and intervention services, like job training, that when successful save the state money down the road. The anticipated savings would be used to pay back investors. The bill creates an oversight committee and authorizes up to $10 million in bonds.
  • A Sunset Advisory Commission is created to make recommendations on reorganization, continuation or abolition of state agencies.

Some high-profile issues were dropped from the final bill, including legislative proposals to reduce the state’s workforce by 15 percent by 2015 and freeze state employee salaries for two years.

Although most agencies and programs receive a smaller reduction in the final agreement than they did in the Legislature’s budget, the cuts will still have consequences. Most agencies have seen their bottom lines get smaller and smaller as policymakers have chipped away their budgets over the last several years. As former Speaker Steve Sviggum – who has served as commissioner at both Labor and Industry and Minnesota Management and Budget – acknowledged at a public forum a few months ago, state agencies can no longer keep doing more with less. 

-Scott Russell


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