Governor Releases First Budget Recommendation
On Tuesday, Governor Tim Walz formally released his biennial budget proposal for fiscal years 2020-21. The proposal, dubbed the “Budget for One Minnesota,” is the new governor’s first opportunity to officially present his administration’s spending priorities to legislative leaders. The $49.5 billion proposal would increase state-spending by nearly $4 billion and includes a number of state revenue increases, including a 20 cent per gallon gas tax increase to support investments in roads and bridges and the reinstatement of a two-percent health care provider tax historically used to fund the state’s public health programs; the latter tax is slated to expire at the end of 2019. The governor and his cabinet must now seek support for the proposal from the only politically divided legislature in the nation.
In presenting the budget proposal, Governor Walz used three themes to frame his initiatives: 1. Education; 2. Healthcare; and 3. Community Prosperity.
Education
Governor Walz’s budget proposal includes a $733 million increase in state education spending. Specifically, Walz proposed a three percent increase in the general education formula ($189 per student) in fiscal year 2020 and an additional two percent ($130 per student) in fiscal year 2021. The administration is also recommending an additional $73 million in special education funding.
In addition to investments in the K-12 system, the governor is also proposing significant investments in higher education, including an approximately $300 per student boost in financial aid at state universities. Finally, in a preview of his yet-to-be-released bonding proposal, the governor highlighted $150 million to address deferred maintenance costs for the University of Minnesota and Minnesota State campuses.
Healthcare
In response to increased costs in the individual health insurance market, Gov. Walz proposes creating a public option health care program, “ONECare.” Sometimes referred to as “MinnesotaCare for All,” the public option would create a “buy-in” option for individuals and families seeking coverage through the state’s MinnesotaCare program, which currently exists to only serve low income individuals.
Walz is also proposing that the Minnesota Department of Human Services take over direct contracting and payment for dental services and prescription drugs for the state’s Medicaid and other public health programs. Finally, the Walz Administration is proposing significant investment in substance use disorder treatment and other programs seeking to combat Minnesota’s growing opioid epidemic that resemble the various bipartisan proposals currently progressing through the legislature.
Community Prosperity
As part of his broad “Community Prosperity” package, Gov. Walz proposes historic investments in housing – including $150 million in state bonding dollars (the highest ever recommended by a governor). The Walz Administration also proposes spending $68 million to establish a state-managed Paid Family Leave Program that would guarantee families a portion of their income after the birth or adoption of a child or when taking time off of work to care for a family member. This program would be paid for by a new tax on both employers and employees, similar to the state’s current unemployment insurance program.
In an attempt to decrease local property taxes, Gov. Walz proposes a $30 million increase in Local Government Aid (LGA) and County Program Aid (CPA). These programs help cities and counties pay for basic public services, such as public safety and human services administration. This investment would return those programs to funding levels last seen in the early 2000’s.
Finally, the governor proposes $70 million additional funding for the State’s Border-to-Border Broadband Program. The administration believes this will provide approximately 193,000 homes and businesses with high-speed internet.
Republican Leaders Respond
Senate Majority Leader Paul Gazelka (R-Nisswa) and House Minority Leader Kurt Daudt (R-Crown) were quick to respond to Gov. Walz’s budget proposal by modifying the governor’s signature “One Minnesota” slogan to: “One Expensive Minnesota.” Both leaders criticized the nearly nine percent growth in state spending and focused much of their consternation on the governor’s proposed tax increases. Specifically, Republicans vowed to fight the continuation of the state’s two percent healthcare provider tax as well as any increase to the gas tax. Republican leaders argued that with a $1.5 billion budget surplus, Minnesota did not need to raise taxes.
It is clear that, although all leaders shared common goals (funding for roads and bridges, lower healthcare costs) the paths to achieving those goals remain in stark contrast.
Looking Ahead
With the governor’s budget proposal now public, Gov. Walz’s cabinet officials will spend the coming weeks presenting the details to a variety of legislative committees. The governor has the opportunity to adjust or supplement his budget proposal following the economic forecast that will be released later this month. However, having left $789 million on the bottom line, the administration likely hopes any change in economic projections can be absorbed without significant changes to its budget recommendations, especially given the proposed injection of new tax revenues.
Finally, Gov. Walz’s proposed budget includes new funds for state debt service, indicating his intention to release a roughly $1.27 billion bonding bill. It is expected that the details of that bill will be released in the next two weeks.
Please reach out to any of the Larkin Hoffman Government Relations team members with any questions.
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