March 25, 2017

Legislative Update – March 24, 2017

Last week the Minnesota House of Representatives released their budget targets, which tell us how they would allocate the state’s projected $1.7 billion surplus for FY 2018-19. Like the Senate targets released earlier in the month, the House targets put the bulk of the surplus to tax reductions and tax aids and credits, and propose a stark decrease in general fund dollars for Health and Human Services.

The targets are an important milestone in the budgeting process. They set the size of the omnibus budget bills that the House budget committees need to put together by March 31.

Similar to the Senate’s priorities, the House designates most of the expected surplus to tax cuts and aids to local governments. The House allocates $1.3 billion for tax cuts in FY 2018-19 while the Senate sets aside $900 million. Also very similar to the Senate, the House targets focus their increased general fund investments primarily in their transportation and education budgets. The House allocates $258 million for the K-12 Education target and $343 million for Transportation. For comparison, the Senate proposes $300 million for E-12 Education and $400 million for Transportation.

And disappointingly, the House’s target for Health and Human Services (HHS) is even lower than the Senate’s. While the Senate targets would cut $335 million in general fund spending for HHS, the House cuts general fund spending by $599 million. And Health and Human Services isn’t merely a wedge in the state’s budget pie, so this target leaves very little room for additional funding for child care assistance, services for Minnesotans living with disabilities, health care for the elderly, and basic resources for very low-income families.

Déjà vu targets call for déjà vu advice. As state policymakers decide how to build the state’s FY 2018-19 budget, we’ve argued they should be cautious. The budget landscape is likely to change significantly as federal policymakers are expected to enact large-scale changes over the next year. State policymakers should maximize the state’s ability to respond by:

– Avoiding large tax cuts, and especially large cuts that grow over time, that would compromise the state’s ability to provide essential services and respond to federal funding cuts, and

– Maintaining a strong budget reserve to be sure the state is equipped to respond to future economic downturns