Questions, answers on the budget deal

Posted at 9:26 AM on July 15, 2011 by Paul Tosto (2 Comments)

MPR News reporter Alex Friedrich put together this easy-to-read package of FAQs on the budget deal. Check it out. Any questions you still want answered? Post below or shoot me an email at ptosto@mpr.org.


OVERVIEW

Q: How did Dayton and the GOP come up with the deal Thursday?

A: It was based on a June 30 set of counter-proposals that the GOP had given Dayton, but which he had rejected at the time.

Q: What were the financial details of the deal?

A: The main items that effectively closed the $1.4 billion gap between the DFL and Republican budgets were the tobacco bonds and delayed school payments.

Q: What did Republicans get?

A: Those tobacco bonds and delayed school payments were gains for the GOP. Dayton had opposed borrowing about $700 million against future payments from the tobacco industry by issuing tobacco bonds. He was also originally against delaying another $700 million or so in payments to school districts.

But even before Thursday, he'd come to accept that move grudgingly. He saw both as temporary fixes to the deficit -- not a permanent solution. Republican leaders aren't wild about the measures, either, but say they're preferable to raising taxes.

Q: What did Dayton get in the deal?

A: The three big things he made conditions for his acceptance of a deal: 1) Republicans are supposed to include a bonding bill of at least $500 million for various construction projects around the state; 2) They are to drop plans to cut the state workforce by 15 percent; and 3) They'll have to drop policy changes they'd been pushing, such as a requirement that voters show photo identification at the polls, a ban on cloning, and an end to taxpayer funding of abortions.

Q: What else did he get?

A: According to the June 30 agreement, Republicans offered: 1) an increase in the per-student funding formula by $50 per student per year to cover borrowing costs; 2) an additional $10 million to the University of Minnesota to put reductions on par with those suffered by the Minnesota State Colleges and Universities system; and 3) restored funding for the Department of Human Rights and Minnesota Trade Office.

Q: How is the deal being received by the two sides?

A: Neither side is particularly happy. Dayton said he won't be able to raise revenue through taxes on the wealthiest Minnesotans, and Republicans say the agreement will cost more than the $34 billion they wanted to spend.

Q: Is all this set in stone?

A: No. Although the general framework has been worked out, leaders on both sides say there will be some tweaks, so it's too soon to say exactly how it will look.

MAIN ITEMS IN THE DEAL

Q: How do tobacco bonds work?

A: The state receives annual payments in perpetuity under a 1998 settlement of its lawsuit against big tobacco companies. Investors buy the tobacco bonds, a deal that gives the state a $700 million advance on that money, which it will use to plug the current deficit. Those future tobacco payments will then go to pay off the bond investors. Read more here.

Q: What are the long-term implications?

A: The state would lose some of the money earned from the sales because of interest and transaction fees. It would eventually have to pay for various programs currently funded through the tobacco money, or cut them.

Q: How do school payment delays work?

A: Although it's not clear the exact percentage, the state would delay up to 40 percent of the payments it normally makes to schools, leaving schools with only 60 percent of the funding they normally would have received. The payment is supposed to be made up next fiscal year. It's an accounting shift that temporarily balances this year's books.

Q: How will they affect schools?

A: The disruption in cash flow will prompt a number of them to take out short-term loans, which will cost them in interest and various loan fees. As part of the deal, however, Republicans did include an increase in the per-student funding formula by $50 per student per year (totaling $128 million) to cover such costs.

Q: How drastic a move is that?

A: For years, the state has done it regularly -- usually involving 10-15 percent of the payments -- as a generally accepted bookkeeping practice designed to deal with the fluid funding formula numbers. Forty percent would be the largest amount ever, though the state has steadily increased the size of the delays over the past decade or so as a temporary budget deficit fix.

DAYTON'S CONDITIONS: A BONDING BILL, THE ELIMINATION OF SOCIAL POLICY CHANGES AND CUTS TO THE STATE WORKFORCE

Q: How large will the bonding bill?

A: Dayton has insisted it be at least $500 million for projects around the state.

Q: What would be in it?

A: It's too early to say. But early this year, Dayton proposed a list that included:

• $51 million for a new 150,000 square-foot physics and nanotechnology building at the University of Minnesota

• $35 million for roof replacements, wall repairs and other improvements to buildings at the University of Minnesota

• $30 million for building improvements at the Minnesota State Colleges and University system campuses

• $28 million in Department of Natural Resources flood hazard mitigation grants for cities and towns

• Center in Rochester, $12 million for Mankato Civic Center and $10 million for St. Cloud Civic Center expansion

• $22 million for improvements to state prisons

• $20 million for a new regional baseball stadium in downtown St. Paul that would be home to the Saints minor league baseball team

• $19 million for building improvements at state parks and other facilities maintained by the DNR

• $16 million to the Three Rivers Park District for dam repair and reconstruction in Coon Rapids

Q: What are the main policy changes that would be eliminated?

A: The most controversial changes would:

• Require voters to show photo identification at the polls, which have drawn protests from groups such as students and the elderly, who say such a measure would disenfranchise them by making it hard for them to vote

• Ban cloning, which has drawn criticism from the University and Minnesota and biomedical community

• End taxpayer funding of abortions

Q: Why does Dayton want a wholesale elimination of policy changes?

A: The governor considers policy issues "extraneous" provisions that don't belong in what's essentially a budget bill. Many of the measures are also ones Democrats generally oppose.

Q: Why did Republicans want a cut of 15 percent to the state workforce?

A: Republicans said it would make state government more efficient, and put the state more on par with the private sector. Dayton and other opponents said that was speculative, and that it wouldn't help the economy or do enough to fill the deficit.

OTHER ITEMS IN THE AGREEMENT

Q: Why does the University of Minnesota get $10 million in additional funding?

A: The university suffered greater cuts than the Minnesota State Colleges and Universities system did -- 14.5 percent from today's funding levels, compared to 11.4 percent for MnSCU -- so the Republicans offered an additional $10 million to help bridge the gap.

Q: Why did Republicans want to cut funding to the Department of Human Rights and Minnesota Trade Office

A: The work of the Human rights Department, which investigates discrimination complaints, educates about discrimination and certifies compliance with equal opportunity hiring laws, is something Republicans say can be streamlined or carried out by other agencies, many of which do their own investigations. But department supporters say the breadth of its jurisdiction allows it to investigate areas -- such as housing discrimination and discrimination based on sexual orientation -- that others don't look into so readily.

It's less clear why Dayton has decided to keep the trade office. While on the campaign trail, the governor called on multiple occasions for its elimination, because he said it has not performed well over the past decade. But in February he appointed his campaign finance director, Katie Clark, to run it. He has tied improved trade to a more vibrant Minnesota economy, and said Clark had a good shot at improving the department. Closing it, he said, was not his biggest priority.

OTHER FUNDING

Q: What happened to Dayton's attempts to raise revenue from other sources?

A: It's a little unclear, but those appear to have died. Political leaders discussing the agreement Thursday did not mention Dayton's proposals to increase surcharges on hospitals and nursing homes, expand gambling or install new sales taxes, close corporate tax loopholes, or beef up non-resident estate taxes. He also appears to have lost his bid to increase taxation of Minnesotans making more than $1 million annually.


Comments (2)

I thought the Republicans had wanted to ban stem-cell research, not cloning. Please clarify.

Posted by Jamie | July 15, 2011 2:56 PM


It was, indeed, a cloning ban that was tied to the issue of stem cells. Here’s a link to a story MPR’s Lorna Benson wrote about the issue in March


Posted by Paul Tosto / MPR News | July 15, 2011 3:55 PM


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