The dust and dollars are settling after the Minnesota Legislature’s five-plus months of budget-setting — the “plus” being a June 12-13 special session. The next biennial budget’s contours are now visible, thanks to preliminary totals from state finance officials, and they include features that may surprise Minnesotans. For instance:
• Total authorized general fund spending for 2016-17 reached $41.8 billion, $706 million more than forecast under previous law. That represents the third-lowest rate of growth, biennium over biennium, since 1960 — a bragging point for the Legislature’s fiscal conservatives. But it’s not the whole story.
• That spending total was suppressed by moving $731 million in allocations out of the 2016-17 general fund, in several ways. The largest portion, $429 million, was accelerated to occur this month and thereby count as spending in fiscal 2015. The remainder involved delayed payments, borrowing from special purpose funds, and assigning some health care spending to the fund previously reserved for MinnesotaCare.
Those are the sorts of shifts and gimmicks that kept the state budget technically in the black during the shortfalls of the Great Recession. It’s odd — and troubling — to see them employed when the state’s 2016-17 forecast showed $1.867 billion in revenues to spare. We doubt that auditors at the ratings services that set state bond ratings will be amused.
• Add those shifts, and spending authorized by the 2015 Legislature totals $42.6 billion, for biennium-over-biennium growth of 8.3 percent, the sixth-lowest since 1960. That’s about $200 million less than DFL Gov. Mark Dayton recommended in March. The Legislature’s fiscal hawks were able to whittle down Dayton’s spending plans by less than 0.5 percent. So much for claims that Dayton was not a winner this session.
• The House GOP majority was not successful in repealing Minnesota Care, the state’s 23-year-old subsidized health insurance program for the working poor. But the $77 million shift in health care spending obligations from the general fund to the fund that supports MinnesotaCare adds to the trouble that’s ahead in state health care funding.
The 2 percent tax on health care services that supports MinnesotaCare (the “provider tax”) is scheduled for repeal in 2019. This session’s additional drawdown of a fund that’s due to run dry in four years makes all the more urgent the work of a new state commission on health care policy, set to commence this summer.
• Left unspent was $865 million for the 2016 Legislature to squabble over — and the prospect of more to come if the state economy stays strong. Already since February, state tax collections have netted $413 million more than forecast.
That much remaining on the state’s bottom line is bound to combine with election-year politics to whet legislative appetites for a tax cut. In coming months, legislators are likely to tell Minnesotans that they’ve got a tax cut coming, and that state and local governments claim too much of their incomes.
No one wants to pay more taxes. But Minnesotans should know this: The “price of government,” the share of total Minnesota personal incomes claimed by state and local taxes, has been falling for years, from 17.4 percent in 1996 and 16.2 percent in 2006 to a projected 15.2 percent in 2016. It’s forecast to drop through the remainder of this decade — not because tax cuts are in the offing, but because incomes are growing again.
Keeping state and local governments robust enough to do all that residents expect of them already looks challenging, before a tax cut is factored into their budgets. At the very least, Minnesotans need to fully understand what they would be giving up in return for lower taxes.