Learn more about the state budget

Below are a wide range of resources to help you learn more about the state budget.

E-12 Education | Higher Education | Health and Human Services | Tax Relief and Rebates | The Law & Public Safety | Other Areas | Income Taxes | Sales Taxes | Cigarette and Alcohol Taxes | Budget Reserves

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General State Budget Information

Spending

E-12 Education
This is the biggest area of state spending, accounting for 40 percent of the state's General Fund budget. The state Constitution requires the government to provide a 'thorough and efficient' system of public schools, enshrining in law the founders' belief that good government depends on the intelligence of the people. About 820,000 students attend Minnesota's K-12 public schools. State spending in this area has more than doubled in the past decade. However, more than half that increase is due to the state taking over education funding previously paid for by local property taxes in 2002.

Higher Education
Many credit the state's higher education system for Minnesota's historic prosperity. But the University of Minnesota and MnSCU can make up for lean state funding by raising tuition. That's exactly what they've done over the last four years. Since 2002, tuition has increased more than 10 percent a year in both systems. This budget area also includes financial aid for low-income students attending both public and private colleges, plus grants to the Mayo Clinic for physician training.

Health and Human Services
This, the second largest area of state spending, helps provide health care for children, the elderly, the poor and disabled. In any given month one-eighth of Minnesota's population gets state help for health care. Minnesota has the lowest rate of uninsured in the country. Roughly 350,000 Minnesotans (7.4 percent) lack private or government-subsidized health insurance--although that number is growing. About 70,000 children lack health insurance. This part of the budget also pays for long-term care for about 350,000 elderly and welfare grants.

Tax Relief and Rebates
Some of your state taxes go to lower property taxes for people across Minnesota, and to give tax breaks for individuals, businesses and industry. Property taxes have increased at an average annual rate of 7.5 percent since 2002 (far faster than inflation). Taxes on homes have gone up even faster. That makes property tax relief a big issue this year. Current state law requires the governor to recommend giving taxpayers back the $1 billion short-term surplus the state is accumulating. But the governor isn't required to really push for the rebate, and lawmakers don't have to approve one.

The Law & Public Safety
The public safety budget of about $1.7 billion pays for prisons, courts, public defenders, the state crime lab and criminal investigators. Together, they account for 5% of the state's general fund budget. There's pressure for more money to cover a growing prison population, accommodate longer sentences for sex offenders and cope with rising crime associated with methamphetamine abuse. No one is seriously discussing cutting spending in this area this year.

Other Areas
This category includes a wide range of agencies. The biggest are debt service, transportation, state agencies and agriculture and the environment. Environmental funds go to maintain clean air, water and land through pollution control and management of state parks. Agriculture spending covers food safety and inspection, as well as subsidies for the state's ethanol producers. Economic development pays for a range of activities, including housing assistance for low-income citizens and tourism promotion. Arts programs and services for veterans are also part of this category.

Resources

Income Taxes
Minnesota relies on income taxes much more than most states do. The income tax accounts for almost half of state tax receipts, and it's progressive (people pay more as incomes rise). As a result, Minnesota has one of the most progressive tax systems in the country. Rising wages and stock market gains are expected to drive up income tax revenues to $15.6 billion in the next biennium. The corporate income tax brings in far less, $2.2 billion over the next two years. It's slightly regressive, because companies pass taxes onto consumers.

Sales Taxes
The 6.5 percent sales tax produces $9.5 billion over two years and accounts for 30 percent of state tax revenue. Minnesota taxes goods, but does not tax many services, such as haircuts and car repairs. Minnesota also remains one of only four states to exempt clothing from the sales tax. The sales tax is known as a regressive tax, because it costs poorer people a greater share of their income than others who are better off.

Cigarette and Alcohol Taxes
These so-called 'sin' taxes are popular with people who don't smoke or drink. They are regressive because they fall disproportionately on low-income people. Increases in alcohol and cigarette taxes can help stem what many consider unhealthy behavior that can later increase state health care and treatment costs. But higher taxes and fees here can also increase smuggling from states with lower taxes.

Budget Reserves
Minnesota has two pots of money set aside for emergencies. One is a rainy-day reserve that currently totals $653 million. The other is a cash-flow account of $350 million that covers short-term deficiencies when tax collections lag behind expenditures. No one is talking about reducing either account; doing so would probably hurt Minnesota's bond rating and increase the cost of borrowing.