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Minnesota state budget

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Minnesota state budget

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Budget calendar:  Biennial
Fiscal year:  2014
State Credit Rating:  AA+ (as of May 2012)
Current Governor:  Mark Dayton
Financial figures
GF expenses[1]:  $20.056 billion (estimated for FY 2013)
All funds expenses:  $35.766 billion (estimated for FY 2013)
Spending % Change:  Green Arrow Up Darker.svg14.16%[2]
% from Federal Funding:  28.13%
State Debt:  $85,879,526,000
Per Capita State Debt:  $15,965
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This page contains information about budget processes and policy issues in Minnesota, including:
  • A summary of the budget drafting process
  • Trends in expenditures and revenues
  • Current and past fiscal year budget developments
  • Financial transparency measures

Between fiscal year 2009 and fiscal year 2013, Minnesota's total expenditures increased by approximately $5.868 billion, from $29.898 billion in 2009 to $35.766 billion in 2013. This represents a 19.62 percent increase, outpacing the cumulative rate of inflation during the same period (9.06 percent, calculated using the Consumer Price Indices for January 2009 and January 2013).[3][4]

Budget process

The state operates on a biennial budget cycle. The sequence of key events in the budget process is as follows:[5][6]

  1. Budget instruction guidelines are sent to state agencies in May and June of the year preceding the start of the new biennium.
  2. State agencies submit their budget requests to the governor in October.
  3. Agency hearings are held from September through December.
  4. The governor submits his or her proposed budget to the state legislature on the fourth Tuesday in January (this deadline is extended to the third Tuesday in February for a newly elected governor).
  5. The legislature typically adopts a budget in May. A simple majority is required to pass a budget. The biennium begins on July 1 of odd-numbered years.

In Minnesota, the governor may exercise line item veto or item veto of appropriations authority.[6]

The governor is legally required to submit a balanced budget proposal. Likewise, the legislature is legally required to adopt a balanced budget.[6]

Expenditures

Definitions

Although each state executes its budget process differently, the National Association of State Budget Officers (NASBO) breaks down state expenditures into four general categories. This allows for comparisons among the 50 states. NASBO's categories are as follows:[7]

  • General fund: "The predominant fund for financing a state’s operations. Revenues are received from broad-based state taxes. However, there are differences in how specific functions are financed from state to state."
  • Other funds: "Expenditures from revenue sources that are restricted by law for particular governmental functions or activities. For example, a gasoline tax dedicated to a highway trust fund would appear in the “Other funds” column. For Medicaid, other state funds include provider taxes, fees, donations, assessments, and local funds."
  • Federal funds: "Funds received directly from the federal government."
  • Bonds: "Expenditures from the sale of bonds, generally for capital projects."

2013 expenditures

Breakdown of expenditures in FY 2013.
Source: National Association of State Budget Officers

The table below breaks down expenditures for fiscal year 2013 (comparable figures from surrounding states are provided to give additional context).[7] Figures for all columns except "Per capita expenditures" are rendered in millions of dollars (for example, $2,448 translates to $2,448,000,000). Figures in the column labeled "Per capita expenditures" have not been abbreviated.

Total state expenditures, FY 2013 ($ in millions)[7]
State General fund Federal funds Other funds Bonds Total Per capita expenditures
Minnesota $20,056 $8,637 $6,263 $810 $35,766 $6,598.43
Iowa $6,231 $5,682 $7,539 $157 $19,609 $6,345.10
North Dakota $2,220 $1,621 $2,072 $26 $5,939 $8,209.92
South Dakota $1,302 $1,487 $1,307 $35 $4,131 $4,889.47
Wisconsin $14,042 $10,815 $17,912 $0 $42,769 $7,447.53
Per capita figures are calculated by taking the state's total expenditures and dividing by the number of state residents according to United States Census estimates.[8]
Source: National Association of State Budget Officers

Expenditures by function

Breakdown of expenditures by function in FY 2012.
Source: National Association of State Budget Officers

State expenditures in Minnesota can be further broken down by function (elementary and secondary education, public assistance, etc.). Fiscal year 2012 data is included in the table below (information from neighboring states is provided for additional context). Figures are rendered as percents, indicating the share of the total budget spent per category.

Expenditures by function, FY 2012 (as percents)[7]
State Elementary and secondary ed. Higher ed. Public assistance Medicaid Corrections Transportation Other
Minnesota 23.8% 9.7% 1.4% 27.6% 1.5% 8.3% 27.7%
Iowa 16.8% 25.0% 0.6% 19.6% 2.7% 7.5% 27.8%
North Dakota 13.8% 17.7% 0.1% 12.1% 1.9% 16.4% 38.0%
South Dakota 14.3% 17.7% 0.8% 20.9% 2.7% 15.9% 27.7%
Wisconsin 16.7% 14.1% 0.4% 16.5% 2.9% 6.9% 42.5%
Source: National Association of State Budget Officers

Expenditure trends

From 2008 to 2012, elementary and secondary education spending fell by 2.60 percentage points, or 9.8 percent, as a share of the budget. During the same period, Medicaid expenditures rose by five percentage points, or 22.1 percent, as a share of the budget. The table below details changes in expenditures from 2008 to 2012.[7][9][10][11][12] Figures are rendered as percents, indicating the share of the total budget spent per category.

Expenditures from 2008 to 2012 (as percents)
Year Elementary and secondary ed. Higher ed. Public assistance Medicaid Corrections Transportation Other
2012 23.8% 9.7% 1.4% 27.6% 1.5% 8.3% 27.7%
2011 22.9% 10.2% 1.5% 25.3% 1.6% 10.1% 28.4%
2010 21.7% 10.7% 1.5% 25.1% 1.6% 9.8% 29.6%
2009 25.5% 10.4% 1.3% 22.2% 1.7% 9.4% 29.4%
2008 26.4% 10.7% 1.3% 22.6% 1.8% 8.9% 28.2%
Change in % -2.60% -1.00% 0.10% 5.00% -0.30% -0.60% -0.50%
Source: National Association of State Budget Officers

Revenues

2013 revenues

Breakdown of general fund revenue sources in FY 2013.
Source: National Association of State Budget Officers

The table below breaks down general fund revenues by source in fiscal year 2013 (comparable figures from surrounding states are also provided to give additional context).[7] Figures for all columns except "Per capita revenue" are rendered in millions of dollars (for example, $2,448 translates to $2,448,000,000). Figures in the column labeled "Per capita revenue" have not been abbreviated.

Revenue sources in the general fund, FY 2013 ($ in millions)[7]
State Sales tax Personal income tax Corporate income tax Gaming tax Other taxes and fees Total Per capita revenue**
Minnesota $4,817 $8,649 $1,165 $39 $2,786 $17,456 $3,220.44
Iowa $2,109 $3,315 $448 $120 $645 $6,637 $2,147.61
North Dakota $1,256 $596 $162 $5 $528 $2,547 $3,520.91
South Dakota $776 $0 $0 $1 $587 $1,364 $1,614.44
Wisconsin $4,410 $7,497 $925 $0 $1,254 $14,086 $2,452.85
Per capita figures are calculated by taking the state's total revenues and dividing by the number of state residents according to United States Census estimates for 2013.[8]
Source: National Association of State Budget Officers

Revenue trends

The table below details the change in revenue sources in the general fund from 2009 to 2013.[7][9] Figures for all columns except "Per capita revenue" are rendered in millions of dollars (for example, $2,448 translates to $2,448,000,000). Figures in the column labeled "Per capita revenue" have not been abbreviated.

Revenue sources in the general fund, Minnesota ($ in millions)[7][9]
Year Sales tax Personal income tax Corporate income tax Gaming tax Other taxes and fees Total Per capita revenue**
2013 $4,817 $8,649 $1,165 $39 $2,786 $17,456 $3,220.44
2012 $4,678 $7,972 $1,044 $41 $2,691 $16,426 $3,053.36
2011 $4,403 $7,529 $925 $42 $2,764 $15,663 $2,929.25
2010 $4,177 $6,531 $664 $40 $2,759 $14,171 $2,668.57
2009 $4,344 $6,988 $708 $43 $2,730 $14,813 $2,812.84
Change in % 10.89% 23.77% 64.55% -9.30% 2.05% 17.84% 14.49%
Per capita figures are calculated by taking the state's total revenues and dividing by the number of state residents according to United States Census estimates.[8][13]
Source: National Association of State Budget Officers

State budgets by year

Biennium 2014-2015

On May 23, 2013, Governor Mark Dayton signed into law several bills that together comprised the 2013-2015 biennium budget. Among these was a tax bill designed to raise in excess of $2 billion in new revenues through an income tax increase on wealthy residents, a cigarette tax increase, and the elimination of select corporate subsidies. The new revenues were set to be used for public education spending, property tax relief, and deficit reduction.[14][15]

The enacted budget is not codified in a single bill, but is rather spread across several appropriations bills.[16] For a summary of state spending in the 2012-2013 and 2014-2015 bienniums, see this series of charts.

Biennium 2012-2013

See also: Minnesota state budget (2011-2013)

Fiscal year 2011

See also: Minnesota state budget (2010-2011)

Fiscal year 2010

See also: Minnesota state budget (2009-2010)

Historical spending

State budget historical spending below was compiled by the National Association of State Budget Officers. Figures reflect the reported "Total Expenditures" in Table 1. Figures for all columns are rendered in millions of dollars (for example, $2,448 translates to $2,448,000,000).[7][10]

Historical state budget spending in Minnesota ($ in millions)
Fiscal year General Fund Other funds Federal funds Bonds Budget totals
Total % of Budget Total % of Budget Total % of Budget Total % of Budget
2011-2012 $17,741 56.6% $4,809 15.3% $8,170 26.1% $609 1.9% $31,329
2010-2011 $16,332 52% $5,022 16% $9,200 29.3% $847 2.7% $31,401
2009-2010 $15,425 51.5% $4,409 14.7% $9,370 31.3% $746 2.5% $29,950
Averages: $16,499.33 53% $4,746.67 15% $8,913.33 29% $734 2% $30,893.33
General Fund: The predominant fund for financing a state’s operations. Revenues are received from broad-based state taxes. However, there are differences in how specific functions are financed from state to state.
Other funds: Expenditures from revenue sources that are restricted by law for particular governmental functions or activities. For example, a gasoline tax dedicated to a highway trust fund would appear in the “Other funds” column. For Medicaid, other state funds include provider taxes, fees, donations, assessments, and local funds.
Federal funds: Funds received directly from the federal government.
Bonds: Expenditures from the sale of bonds, generally for capital projects.

State debt

According to a January 2014 report by the nonprofit organization State Budget Solutions, Minnesota had a state debt of over $85 billion. Its state debt per capita was $15,965. The report revealed that state governments faced a combined $5.1 trillion in debt, 33 percent of annual gross state product. The obligation amounts to $16,178 per capita in the nation. A bulk of the state debt -- 79 percent -- was linked to unfunded public pensions.[17][18]

Total state debt in Minnesota[19]
Type Totals U.S. rank
Total state debt $85,879,526,000 20
Per capita debt $15,965 21
State and other fund expenditures $22,550,000,000 29

Public pensions

See also: Minnesota public pensions and Minnesota public employee salaries

A 2012 report from the Pew Center on the States noted that Minnesota's pension system was funded at 80 percent at the close of fiscal year 2010, just on par with the 80 precent funding level experts recommend. Consequently, Pew designated the state's pension system as needing "improvement."[20]

The funding ratio for the state's pension system decreased from 84.24 percent in fiscal year 2007 to 75 percent in fiscal year 2012, a decrease of 9.24 percentage points, or 11 percent. Likewise, unfunded liabilities increased from approximately $9.1 billion in fiscal year 2007 to nearly $16 billion in fiscal year 2012.[21][22][23]

Credit ratings

States sometimes sell general obligation bonds to investors in order to finance large-scale undertakings (e.g., road construction and other public works projects). Credit rating agencies, such as Standard and Poor's, assign grades to states, evaluating their ability to pay the principal and interest on such bonds. Standard and Poor's grades range from AAA, the highest available, to BBB, the lowest. Generally speaking, a higher credit rating indicates lower risk for an investor, which in turn lowers costs for taxpayers.[24]

The table below lists the Standard and Poor's credit rating for Minnesota from 2001 to 2012 (grades from surrounding states are provided for additional context).[24]

S&P credit ratings from 2001 to 2012
Minnesota Iowa North Dakota South Dakota Wisconsin
2012 AA+ AAA AA+ AA+ AA
2011 AAA AAA AA+ AA+ AA
2010 AAA AAA AA+ AA AA
2009 AAA AAA AA+ AA AA
2008 AAA AAA AA AA AA
2007 AAA AA+ AA AA AA-
2006 AAA AA+ AA AA AA-
2005 AAA AA+ AA N/A AA-
2004 AAA AA+ AA- N/A AA-
2003 AAA AA+ AA- N/A AA-
2002 AAA AA+ AA- N/A AA-
2001 XXX AA+ AA- N/A AA

Federal aid to state budget

See also: Federal aid to budgets in the 50 states

The chart below notes how much of the state’s general revenues come from the federal government. Figures were calculated by dividing each state’s federal intergovernmental revenue into its general revenue. The number in the rightmost column indicates the state's ranking in relation to the rest of the nation (e.g., if "1," the state receives the highest percentage of federal funding in the nation). Figures from neighboring states are included to provide additional context.[25]

State governments receive aid from the federal government to fund a variety of joint programs, such as Medicaid. Federal aid varies considerably from state to state. For example, Mississippi received approximately $7.7 billion in federal aid in 2012, which accounted for more than 45 percent of the state's general revenues. By contrast, Alaska received roughly $2.9 billion in federal aid in 2012, just under 20 percent of the state's general revenues.[25]

Federal aid to state budgets in 2012
State Federal aid as % of general revenue Total federal aid National rank
Minnesota 28.13% $9,608,018,000 39
Iowa 33.27% $6,073,376,000 25
North Dakota 20.49% $1,750,134,000 49
South Dakota 40.85% $1,630,220,000 4
Wisconsin 28.19% $8,855,079,000 38

Stimulus

Minnesota received $3.75 billion in federal stimulus funding between February 2009 and June 2013.[26]

Budget transparency

Transparency evaluation
Minnesota transparency website
Searchability Y
600px-Yes check.png
Grants N
600px-Red x.png
Contracts Y
600px-Yes check.png
Line item expenditures N
600px-Red x.png
Dept./agency budgets Y
600px-Yes check.png
Public employee salaries P
Partial.png
Last evaluated in 2009.
See also: Evaluation of Minnesota state website and Constitutional provisions regarding reading of bills

Minnesota launched a spending database in March 2009 (over one year after the mandated launch date).[27][28] According to an article in The Star Tribune, the Department of Administration had not launched the website because "an old state computer system, which was being updated, was not Internet-friendly. It's not clear if the new computer system would include a spending database because the Legislature didn't appropriate the $1 million to $1.5 million needed for it."[29]

According to a press release from the Office of the Governor, "The site was created by Minnesota Management and Budget (MMB) and offers on-line, round-the-clock access to data on state payments for schools, local governments, contractors and other vendors. With just a few clicks, citizens can access detailed information on most state spending. The data is supplied by the state's accounting system and updated nightly."[27]

The table to the right is helpful in evaluating the level of transparency provided by the state spending database.

Multi-measure budget transparency profile

The Institute of Government and Public Affairs at the University of Illinois created a multi-measure transparency profile for Minnesota, which measured state transparency as of September 2011 using indicators from a range of organizations. These indicators measured both website transparency and other recognized facets of governmental transparency. In addition, IGPA presented four unique indicators of non-transparency based on the observation that transfers or reassignments between general and special funds can obscure the true fiscal condition of a state.[30][31]

IGPA devised a budget transparency index based on information available from the National Association of State Budget Officers. Minnesota tied for 20th in the nation with 12 other states, earning five out of eight possible points.[31]

Minnesota - IGPA score for budget process, contents and disclosure
Budget transparency indicator Yes or no?
Performance measures N
600px-Red x.png
"Generally Accepted Accounting Principles" budget N
600px-Red x.png
Multi-year forecasting
{{{1}}}
Annual cycle N
600px-Red x.png
Binding revenue forecast
{{{1}}}
Legislative revenue forecast
{{{1}}}
Non-partisan staff Y
600px-Yes check.png
Constitution or statutory tax/spend limitations Y
600px-Yes check.png
TOTAL 5

In addition to the individual state profile, IGPA offers a 50-state comparison and profiles for other states.[31]

U.S. PIRG "Following the Money" report

See also: Following the Money 2014 Report

The U.S. Public Interest Research Group, a consumer-focused nonprofit organization based in Washington, D.C., released its annual report on state transparency websites in April 2014. The report, entitled "Following the Money," measured how transparent and accountable state websites are with regard to state government spending.[32] According to the report, Minnesota received a grade of D+ and a numerical score of 64, indicating that Minnesota was "lagging" in terms of transparency regarding state spending.[32]

Accounting principles

See also: Minnesota government accounting principles

Minnesota auditing authority is divided between the State Auditor and the Legislative Auditor. The Office of the State Auditor is a constitutional office charged with overseeing more than $20 billion spent annually by local governments in Minnesota. The Office of the State Auditor publishes its audit reports online. The Office of the Legislative Auditor audits state agencies and constitutional offices, and also publishes its audit reports online.[33] In addition to the office's primary focus on state agencies and programs, this office also audits three metropolitan agencies and selectively reviews programs that are administered locally.[34]

Contact information

Minnesota Management and Budget
658 Cedar Street, 400 Centennial Building
St. Paul, Minnesota 55155
Telephone: 651-201-8000

See also

External links

Additional reading

References

  1. Refers to General Fund spending. Typically in state budgets the General Fund is spending that is most directly controlled by state legislators.
  2. This figure is derived by calculating the percent difference between the prior two years' spending levels according to the National Association of State Budget Officers.
  3. Bureau of Labor Statistics, "CPI Detailed Report Data for February 2014," accessed April 9, 2014
  4. InflationData.com, "Cumulative Inflation Calculator," February 28, 2014
  5. National Conference of State Legislatures, "State Experiences with Annual and Biennial Budgeting," updated April 2011
  6. 6.0 6.1 6.2 National Association of State Budget Officers, "Budget Processes in the States, Summer 2008," accessed February 21, 2014
  7. 7.0 7.1 7.2 7.3 7.4 7.5 7.6 7.7 7.8 7.9 National Association of State Budget Officers "State Expenditure Report, 2011-2013," accessed February 21, 2014
  8. 8.0 8.1 8.2 United States Census Bureau, "Annual Estimates of the Resident Population: April 1, 2010 to July 1, 2013," accessed February 26, 2014
  9. 9.0 9.1 9.2 National Association of State Budget Officers, "State Expenditure Report, 2009-2011," accessed February 24, 2014
  10. 10.0 10.1 National Association of State Budget Officers, "State Expenditures Report, 2010-2012," accessed February 24, 2014
  11. National Association of State Budget Officers, "State Expenditure Report, 2009," accessed February 24, 2014
  12. National Association of State Budget Officers, "State Expenditure Report, 2008," accessed February 24, 2014
  13. United States Census Bureau, "Vintage 2009: Annual Population Estimates," accessed February 26, 2014
  14. MPR News, "Budget in hand, Legislature adjourns," May 21, 2013
  15. Office of the Governor, "Governor Dayton Signs Multiple Bills," May 23, 2013
  16. Minnesota Legislative Reference Library, "State Budget," accessed April 23, 2014
  17. State Budget Solutions, "State Budget Solutions' Fourth Annual State Debt Report," January 8, 2014
  18. Washington Examiner, "EXography: Unfunded public employee pensions drive state debts skyward," January 21, 2014
  19. State Budget Solutions "State Budget Solutions' Fourth Annual State Debt Report," January 8, 2014
  20. Pew Center on the States, "Widening Gap Update: Minnesota," June 18, 2012
  21. Minnesota State Retirement System, "2012 Comprehensive Annual Financial Report," accessed November 26, 2013
  22. Public Employees Retirement Association of Minnesota, "2012 Comprehensive Annual Financial Report," accessed November 26, 2013
  23. Teachers Retirement Association of Minnesota, "2012 Comprehensive Annual Financial Report - Financial Section," accessed November 26, 2013
  24. 24.0 24.1 Stateline: The Daily News Service of The Pew Charitable Trusts, "Infographic: S&P State Credit Ratings, 2001-2012," July 13, 2012
  25. 25.0 25.1 United States Census Bureau, "State Government Finances: 2012," accessed February 24, 2014
  26. Recovery.gov, "Stimulus Spending by State," accessed February 21, 2014
  27. 27.0 27.1 Office of the Governor, "Governor Pawlenty Unveils New State Website to Allow Citizens to Track Government Spending Online," March 26, 2009
  28. Minnpost.com, "Many states, including Minnesota, lag in putting their spending on the Internet," February 27, 2009
  29. The Star Tribune, "A blogger's quest: Where's the database?" May 15, 2009
  30. Institute of Government and Public Affairs at University of Illinois, "Home page," accessed February 21, 2014
  31. 31.0 31.1 31.2 Institute of Government and Public Affairs at University of Illinois, "Budget Transparency Profiles - All 50 States," September 2011
  32. 32.0 32.1 U.S. Public Interest Research Group, "Following the Money 2014 Report," accessed April 15, 2014
  33. Minnesota Office of the State Auditor, "Home page," accessed October 27, 2009
  34. Minnesota Office of the Legislative Auditor, "Home page," accessed October 27, 2009