Budget is done, but what's in it for me?by Elizabeth Dunbar, Minnesota Public Radio
St. Paul, Minn. — You've heard the latest: They pulled an all-nighter at the State Capitol. The Republican governor and Democrats in the Legislature agreed on how to solve the budget deficit. Both sides were happy with the deal under the difficult economic circumstances.
So what's in it for me, you ask? It depends who you are.
Overall, Minnesota's budget is balanced, meaning the state is bringing in enough tax money and other revenue to pay for all the services it offers its residents -- public schools, health care and other assistance for the poor, highways patrolled by state troopers, state parks and trails, higher education institutions and everything else.
But next year, after Gov. Tim Pawlenty leaves office and many legislators have moved on, lawmakers will likely face a difficult task again to make sure everything adds up.
The state of the economy will have a lot to do with how difficult the task is and what actions will be needed: Higher taxes to maintain services? Reducing services to save money? Asking the federal government for help?
For now, though, it's becoming clear that Minnesotans will see changes in their communities resulting from this week's budget agreement. Here are examples of some of those changes:
LOW-INCOME MINNESOTANS ON STATE HEALTH CARE PROGRAMS AND THE HOSPITALS THAT SERVE THEM
Lawmakers made big changes this year to a state program called General Assistance Medical Care, which covers low-income single adults who don't have children.
Some of the more than 30,000 people on that program might not be able to go to the hospital they've been going to. While four Twin Cities area hospitals are participating in the revamped program, hospitals in greater Minnesota haven't yet decided whether they will participate.
The new program creates a pool of money, and participating hospitals tap into that money when treating GAMC patients. The amount of money in the pool was increased by $10 million during budget negotiations, but hospitals are still concerned there isn't enough.
"I think other hospitals will be very cautious" about joining, said Minnesota Hospital Association President Lawrence Massa.
Hospitals would have liked the state to adopt the federal expansion of Medicaid early, which would have allowed a group of Minnesotans on GAMC and MinnesotaCare to be transferred to Medicaid.
That didn't happen in the final budget deal, although the next governor will have the option to adopt the early Medicaid expansion and receive more federal money. Otherwise, the federal program -- part of the new health care law -- won't kick in until 2014.
Meantime, hospitals will have to examine their budgets, and some will likely use hiring freezes or even layoffs to stay financially healthy.
"Hospitals are receiving far less than their cost of care, and that's only going to get worse," Massa said.
More than half of the state's budget shortfall was covered by delaying payments to school districts. It's a strategy that's been used before to balance the budget. But without a written plan to pay back the schools, lawmakers can keep delaying the payments whenever there's a deficit.
Even though schools do eventually receive their money, there are real impacts to the delayed payments. School districts have had to dip into reserves or get loans to cover the gap.
Part of the compromise between DFL legislative leaders and Pawlenty was to include in the budget bill language requiring the state to start paying the schools back beginning next year. But because there's no dedicated funding source to pay back the schools, it could take a while before they receive those payments.
School districts said their cash flow problem will continue next year.
"It's just going to mean that much more borrowing, or spending down their fund balance. And we're getting to the point now where not many school districts have fund balances left -- they've drained those, and many of those are engaged in short-term borrowing," said Scott Croonquist, who lobbies at the Capitol for metro-area schools.
Charter schools could face even more challenges, because many of them can't receive the same kinds of loans as public school districts.
COLLEGES AND UNIVERSITIES
The construction workers who are renovating and expanding buildings on campuses this summer might make it look like the state's colleges and universities are in good financial shape.
But all of those projects are being funded by a bonding bill that allows the state to borrow money in order to create jobs and improve infrastructure.
Move-in vans were parked outside of Folwell Hall at the University of Minnesota on Monday as that building prepares for a renovation project. At North Hennepin Community College, a business and technology center will soon be renovated and expanded. And a new classroom center is being built at Metro State University.
The University of Minnesota and MnSCU had hoped for even more money for projects. Meanwhile, general funding for both institutions was reduced.
The U of M and MnSCU have already taken steps to deal with that: U of M faculty will see a pay cut starting July 1, and clerical workers and others will be furloughed at the end of the year. MnSCU is looking at offering fewer programs and will likely increase tuition. U of M students will see a tuition hike this fall.
U of M and MnSCU campuses have all seen faculty positions held open, and that's expected to continue.
Richard Pfutzenreuter, the U of M's chief financial officer, said with the state facing another deficit in the budget period that begins in July 2011, the university could face even more cuts.
"It's just been a bad nightmare. The unfortunate thing is that now we're being told that the nightmare is going to last another couple of years," he said.
CITIES AND COUNTIES
Mayors, county commissioners and city administrators have known for a while that they wouldn't be getting as much money from the state under a program known as local government aid.
There's some relief that cities and counties won't have to deal with a third round of cuts from the latest effort to balance the state's budget. But local government officials are already anticipating more cuts next year if the economy doesn't improve.
Cuts in services have already begun, and officials are looking at more cuts, as well as considering options for raising more revenue.
What does that mean for your community? Perhaps the local library will reduce hours, or the snow will be plowed less often. You might see a sheriff's deputy patrolling a small town rather than a city police officer, as some communities eliminate their police departments.
In other rural areas, 911 calls and fire service are being shared or consolidated.
"I think cities have taken some fairly severe steps, including hiring freezes, layoffs," said Gary Carlson, who represents the League of Minnesota Cities at the State Capitol. "There've been some very difficult decisions on how to cope with this uncertainty."
Finding new ways to raise money has also been a coping mechanism. The city of Rochester, for example, will soon start charging a fee for street lighting.
Some local governments have been able to raise property taxes or sales taxes, but there are limits to that.
If you're a Minnesota Vikings fan who was wishfully thinking budget negotiators would find some state money for a new stadium, you're out of luck.
Legislation to raise money for a new stadium through taxes on hotels, jerseys and rental cars died.
One reason was bad timing: The bill was introduced the same week the Supreme Court ruled against Pawlenty's unilateral cuts from last summer, increasing the budget deficit to nearly $3 billion.
"That issue, understandably, got sidelined by the unallotment decision and the resulting fallout from that," Pawlenty said, describing the team as an "important asset" to Minnesota. "The Vikings issue is going to have to wait until next year."
(MPR reporters Lorna Benson, Tom Weber and Laura Yuen contributed to this report.)