a fiscal review

A

Fiscal Review

of the

2006 Legislative Session

Prepared byMinnesota State Senate

Office of Senate Counsel, Research, and Fiscal AnalysisG-9 State Capitol

75 Rev. Dr. Martin Luther King, Jr. Blvd.St. Paul, MN 55155-1606

Edited byMatt Massman

This document is made available electronically by the Minnesota Legislative Reference Library as part of an ongoing digital archiving project. http://www.leg.state.mn.us/lrl/lrl.asp

A

Fiscal Review

of the

2006 Legislative Session

Prepared byMinnesota State Senate

Office of Senate Counsel, Research, and Fiscal AnalysisG-9 State Capitol

75 Rev. Dr. Martin Luther King, Jr. Blvd.St. Paul, MN 55155-1606

Edited byMatt Massman

ON THE COVER

This gold-leafed copper and steel statuary group, "Progress of the State," was sculpted byDaniel Chester French and Edward Potter and placed on the Capitol in 1906. The fourhorses, known as the Quadriga, represent the power ofnature: earth, wind, fire and water.The women symbolize civilization and the man standing on the chariot representsprosperity. In 1994, the Quadriga was removed from the capitol building for completerestoration and regilding, and was reinstalled in 1995.

Dates of the 2006 Legislative Session

Regular Session: March 1,2006 to May 21, 2006

This publication was developed by the staff of Senate Counsel, Research, and Fiscal Analysis, and wasedited by Matt Massman. Special recognition is due Renee Rose, for preparation and layout of themanuscript and the tables within the articles; Dave Giel, who assisted with the editing; and Counsel,Research, and Fiscal Analysis staff, for the various budget and policy areas contributed to the relevantreport sections.

The cover was done by David Oakes. Special thanks to Carolee Stock, who assisted in copyreading andproofreading.

The Fiscal Review was printed by the Secretary of the Senate's Office, Senate Duplicating, Dan Olson,Supervisor.

The Fiscal Review can also be accessed at the following Web site address:

http://www.senate.leg.state.mn.us/departments/scr/freview/2006IfiscalJeview.pdf

Table ofContents

INTRODUCTION....•.......•.••...................••.......•...................•....................1

SUMMARY FISCAL AND POLICY ACTIONSOF THE 2006 LEGISLATURE•...•...•........•.•..•.........•.....................................4

State Tax Revenues 13Elementary and Secondary Education•.......•..•............••.•..•...........................20Early Childhood and Family Education...........•..............................................26Higher Education••..........••........••...........•••.............•......•.........................30Health and Human Services........•...........•.•..........•......•..........................-.....33Environment and Agriculture•.....•....••...........•...........•................................41Economic Development 49Public Safety and Judiciary.•...........................•.......................•..................54Transportation.••.......•............••...........•••................................................58State Government Finance.........•................................•................................62Tax Aids and Credits..........•.....................................................................70Capital Expenditures..........•..•.............................•......................•.............72Minnesota Twins Baseball Stadium 78University of Minnesota Football Stadium..•.....•.....................•.......................81Eminent Domain....••.•••..........•••........•..••••.............••••....•.......•......•....•....•..83J»ensions..•.....•..•.•....•..............••••...........•••.............................................84

APPENDIX...•.................•....•.................................................................87

INTRODUCTION & BUDGET BACKGROUND

The Fiscal Review is an annual report ofactions taken by the MinnesotaLegislature. The report covers allbudgetary funds (All Funds), withspecial attention given to the GeneralFund, which is required by theMinnesota State Constitution to bebalanced. Budgetary funds include onlyabout 40 of the over 130 different statefunds established in law, but generallyreflect state operations. Dollar totalsinclude all fiscal actions, but the reporttext may not cover every budget changein detail.

Minnesota operates on a biennial (twoyear) budget basis, with the budgettypically being enacted in odd-yearlegislative sessions; biennial budgetrevisions and major capital investmentstend to be the focus of even-yearlegislative sessions. Consequently, mostrevenue and expenditure amounts arepresented as biennial amounts. Annualamounts may, however, provide a morecomplete understanding of actions takenand are available by contacting therelevant Senate fiscal staff, or byconsulting legislative budget trackingsheets at:

http://www.senate.leg.state.mn.us/departments/fiscalpolltracking/2006/index.shtrnl.

Appropriations versus SpendingAmounts shown for previous biennia(odd-year Fiscal Reviews) reflect actualspending while amounts shown for thecurrent biennium reflect appropriations.

Appropriations are authorizations madeby the Legislature to spend money fromthe state treasury for the purposesestablished by law. Direct appropriations

1

are temporary authorizations for aspecific dollar amount and time period;amounts are typically specified insession law. Statutory appropriations areongoing authorizations for spendingeither a specific dollar amount or anopen-ended amount and are specified instatutes. The amounts shown forstatutory appropriations in state budgetdocuments and the Fiscal Review reflectestimates of expected spending.Statutory appropriations grant ongoingspending authority even if a biennialbudget is not adopted.

Dedicated revenues and expendituresrefer to streams of revenue that arededicated in law to specific fundingpurposes. Amounts shown for authorizedspending levels reflect the estimates ofthe revenues to be generated.

"Base" versus Prior-Biennia AmountsVarious measures may be used tocompare current budget decisions to pastbudgets. Odd-year Fiscal Review reportscompare the current biennium to theprior biennium (e.g. FY 2006-2007 -vFY 2004-2005); and current biennium tothe "base." "Base," which is defined inMinnesota Statutes, section 16A.11,subdivision 3, refers to the amounts thatwould be expended if directappropriations for the second year of thebiennium were carried forward and nochanges were made to statutoryappropriations. Even-year Fiscal Reviewreports compare the current biennialbudget as initially enacted to theadjusted biennial budget.

Report Organization and ContentThe report is organized by budget area.In general, Table I of each sectionidentifies legislative changes to thebudget, and Table 2 provides abreakdown of each budget by agencyand fund. Some budget areas are fundedalmost exclusively from the GeneralFund, while others are funded largelyfrom other funds. An appendixsummarizes the overall state operatingbudget by budget area and fund.

2

(This page is intentionally left blank.)

3

SUMMARY OF FISCAL ACTIONS - 2006 LEGISLATURE

The 2006 Legislature approved $1.0billion of bonding for capitalimprovement projects, authorizedfinancing and construction for two newsports stadiums, and adopted asupplemental budget containing variousrevisions to FY 2006-2007 biennialbudget enacted in 2005. The Legislaturealso modified state and local pensionprograms and reformed the state eminentdomain law. Most changes enacted in2006 were to the General Fund, and

changes were modest relative to theoverall size of the budget.

As illustrated by Table 1, 2006legislative actions bring total all-fundsspending for FY 2006-2007 to $51.0billion, an increase of $265 million, or0.5 percent, over the amounts projectedin February 2006. Of that amount,General Fund spending will total $31.6billion, an increase of $223 million, or0.7 percent, over forecasted amounts.

49

64

592

81

754

818

(272

(128)

Forecast Feb. 2006Changes Forecast

Amounts

7,631

7,833

50,12211,71

30,574

11,6949,914

30,586

OriginalBudget

(Enacted 2005)

urrent Revenues*

*Amounts do not include balance carryforwards.

xpenditures & Transfers

Federal Funds

otal Revenues

General FundOther Funds

Federal Funds

General FundOther Funds

Table 1FY 2006-2007 Biennial Bndget-All Funds

Comparison of End-of-Session 2005 to End-of-Session 2006(dollars in millions)

otal SpendingSource: Department of FinanceConsolidated Funds Statement

Table 1 also summarizes revisions to FY2006-2007 revenues and spending basedon actual revenue collections andspending (open and forecastedappropriations), revised economicprojections, and previously enacted laws.Since 2005, an improved outlook forGeneral Fund revenues allowed for an$818 million increase in General Fundspending, of which $790 million wasgoverned by previously enactedcontingent appropriations to reverse

education aid and property taxrecognition shifts adopted in 2002 and2003 to help balance the budget.Another $53.0 million is attributable tolanguage adopted in 2005 to allow stateagencies to carry forward unspentoperating funds from the 2004-2005biennium. Among other funds, a $13.5million reduction in revenues andspending for transit funds and reducedhighway user tax distribution fundrevenues reflect the ongoing

4

sluggishness of the dedicated revenuestreams for those funds.

FY 2006-2007 General Fund ChangesThe February 2006 General Fundforecast projected available resources of$405.1 million for the FY 2006-2007biennium, including a projected balanceof $88.4 million and a tax relief accountbalance of $316.7 million. Assummarized in Table 2, the Legislature

used $92.2 million of those resources forvarious tax reductions and $203.2million for net spending increasesincluding appropriation increases of$222.6 million partially offset by $19.4million from nontax revenue sources.The remaining tax relief account balanceof $109.7 million will cancel to theGeneral Fund in FY 2008 to offset theloss of revenue from permanent taxreductions.

Table 2Summary of FY 2006-2007 General Fund Changes

(dollars in millions)

esourcesGeneral Fund BalanceTax Relief Account BalanceTotal Resources

sesAppropriation Increases (a)

Non-Tax Revenue Increases (b)Net Spendin Increases (a-b)Tax Revenue DecreasesRemaining Tax Relief Account Balance*Total Uses

alance*The remaining balance will cancel to the General Fund in FY 2008.

Table 3 summarizes the FY 2006-2007General Fund changes by budget area.General Fund revenue is now expectedto total $31.3 billion, while spendingwill total $31.6 billion, after accountingfor selected vetoes by the Governor. The$280.0 million gap between currentrevenues and spending was closed with$207.0 million from the tax reliefaccount and $73.0 million ofcarryforward of unspent appropriationsfrom the FY 2004-2005 biennium.

5

Revenues are $72.8 million, or 0.2percent, lower than forecasted levels dueto legislative actions, including a $92.2million reduction in tax revenues and a$19.4 million increase from otherrevenue sources. Spending wasincreased $222.6 million, or 0.7 percent,over forecasted levels. While legislativechanges were modest relative to theoverall budget, the changes reflectinitiatives in several areas, includingreforms to the alternative minimumincome tax and standard married

deduction, expansions of early childhoodeducation and child care programs,funding for higher education programssponsored by the University of

Minnesota in Rochester, and funding forvarious economic developmentinitiatives.

Feb. 2006ForecastAmounts

1,39

ForecastChanges

3901,003

OriginalBudget

(Enacted 2005)

1,208

2012,4062,7618,228

88286306

1,685584205

2,984781

52(d) 30,574

1,003 00 31

Table 3FY 2006-2007 Biennial Spending General Fund

Comparison of End-of-Session 2005 to End-of-Session 2006(in millions)

evenues

otal Revenues (b)

a1ance Forward (a)

ud etar Balance (c-d 12 8*Includes $53 million in state agency operations carryforward and $20 million contingently appropriated underprior law.**Less than $1 million.

Non-Tax/Other RevenuesTransfers

Tax Revenues

Relative to the end of the 2005 session,General Fund revenues are nowexpected to be $746 million higher$818 million more in forecast growthless $73 million of reductions enacted in2006. Similarly, General Fund spending

is now expected to be $1.038 billionhigher-$815 million of spendingfunded by forecast growth underpreviously enacted laws and $223million due to increases enacted in 2006.

6

General Fund Revenues-TaxReductionsAs illustrated in Table 4, the 2006Omnibus Tax Act (Chapter 259)provided for state General Fund taxreductions totaling $92.2 million in FY2006-2007 and $115.7 million in FY2008-2009. Those changes, which arediscussed in more detail in the State TaxRevenues Chapter, included:

• conforming to federal tax changesfor married couples taking standarddeductions ($23.8 million forFY2006-2007) and to selected otherfederal tax changes made since 2005($36.2 million in FY 2006-2007);

• increasing the state alternativeminimum tax exemption amount($23.8 million);

• creating an income tax credit foractive duty military members ($8.1million);

• adopting an income tax credit forcosts associated with bovine testing($390,000); and

• reducing the portion of the Juneaccelerated sales tax payments from85 percent to 78 percent of estimatedJune tax collections ($22.6 million).This change also lowers FY 20062007 collections for the HealthImpact Fund, which will then resultin a smaller transfer to the GeneralFund.

Table 4Summary of General Fund Revenue Changes-2006 Legislature

(in thousands)FY 2006-2007 FY 2008-2009

Tax Revenues-various (Ch. 259) (92,215) (115,704Non-Tax RevenuesDHS-SOS Collections (Ch. 282) 10,517 16,276HHS-Medicare Part D (Ch. 170) 4,000 CAg-Apiary Fees (Ch.265) (21) (42DNR-Timber Sales (Ch.281) 11 8

TransfersHealth Impact Fund (Ch.259) (1,360) 25Tobacco Endowment Funds (Ch. 282) 2,933 0POST Board-Special Revenue (Ch. 282) (200) (400)

lDedicated RevenuesDHS-Critical Access Dental Care (Ch. 282) 3,532 110

Ifotal Revenue Changes (72,803) (99,727\

Table 4 also lists all the other changes toGeneral Fund revenues. The TobaccoEndowment Fund transfers reflectprovisions in Chapter 282 that directedthe transfer of earnings that posted to theendowment funds since the principal inthose funds was transferred to the

7

General Fund in 2003 to help balancethe budget; the endowment funds wererepealed. Only minor changes weremade to nongeneral fund revenues.

Supplemental AppropriationsAs summarized in Table 5, most budgetprovisions enacted in 2006 were forGeneral Fund programs. Of the $223million increase in General Fundspending, $115.0 million was for healthand human services programs, including$92.6 million to cover funding shortfallsfor state-operated services treatmentprograms and for veterans programs.

Appropriations for debt service andcapital projects were increased by $7.7million in FY 2006-2007 and by $67.8million in FY 2008-2009, reflecting thetime lag between the sale of capitalinvestment bonds and initial debt servicepayments. Increased appropriations werealso granted for early childhoodeducation programs, child care, cleanwater programs, several economicdevelopment initiatives, and otherprograms.

Table 5Summary of General Fund Appropriation Changes

2006 Legislature(dollars in thousands)

FY 2006-2007 FY 2008-2009General Fund

Early Childhood Education 12,990 33,871K-12 Education 8,233 35,126Higher Education 5,000 11,330Agriculture 3,849 1,254Environment 13,174 1,300Economic Development 29,652 450Transportation 692 °Public Safety 19,684 20,034State Government 5,799 10,168Health and Human Services 115,036 166,728Tax Aids and Credits 720 409Debt Service-Capital Projects 7,779 67,836Gopher Stadium ° 20,500

[rotal General Fund 222,608 369,00(j

Capital Investment and Debt ServiceThe 2006 Legislature authorized theissuance of $1.0 billion ($999,980,000)ofbonds to fund a wide range of capitalimprovements throughout the state,including $874.7 million of generalobligation bonds to be repaid with stategeneral funds. General Fund debt serviceexpenditures are expected to increase by

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$6.8 million in FY 2006-2007 and $67.8million in FY 2008-2009 as result of theprovisions contained in Chapter 258, the2006 Omnibus Bonding Bill. Theremaining $125.4 million of bonds willbe repaid from user financing, statetransportation funds, and through themaximum effort school loan program.

Proceeds from the bonds authorized willbe used to support numerous specificprojects and general capitalimprovement programs, including:$307.2 million for higher educationfacilities; $163.6 million fortransportation and transit projects;$136.1 million for parks, trails andnatural resource programs operated bythe Department of Natural Resources orthe Metropolitan Council; $61.1 millionfor correctional facilities; $58.3 millionfor treatment facilities operated by theDepartment of Human Services; andvarious other projects such as housing,cultural and recreational facilities, zoofacilities, education facilities, CleanWater program and wastewater andwetland projects, and preservation ofstate-owned facilities.

Early Childhood Education and ChildCare ProgramsSupplemental appropriations included anadditional $4.8 million in FY 2006-2007for various early childhood educationprograms, an overall increase of fourpercent for such programs. Increases tothe per pupil/capita amounts for the earlychildhood and family education (ECFE)and adult basic education (ABE) fundingformulas will provide increased fundingfor these programs to virtually all areasof the state.

In addition, basic sliding fee child carespending will increase by $7.9 millionover forecasted amounts for FY 20062007 to accommodate four changes inthat program, including an increase inreimbursement rates for child careproviders, a 15 percent bonus rate foraccredited providers, changes to thepolicy for absent days, and funding toreduce the waiting lists for the program.

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Further, because these changes alsoapply to the child care provided toparents served by the Minnesota FamilyInvestment program (MFIP) andtransition-year, funding for child carewill increase by a total of $15.8 millionin FY 2006-2007, with one-half fundedeach from the General Fund and thefederal TANF Fund.

Higher Education-RochesterProgramsAn additional $5.0 million of generalfunds was appropriated in FY 2007 foracademic programs supporting theUniversity of Minnesota-Rochester. Thefunds are to be used for faculty, staff,facilities, and program planning anddevelopment in the areas of biomedical,engineering, computer technologies,health care administration, and alliedhealth programs. Further, Chapter 282also provided funding for theBiotech/Medical Genomics partnershipbetween the University of Minnesotaand the Mayo Clinic (see EconomicDevelopment) and Chapter 258 providedfunding for a variety of higher educationfacilities statewide (see CapitalInvestment).

Economic DevelopmentBiotechnologylMedical GenomicsFundingThe 2006 Legislature provided $33.9million, mostly onetime supplementalappropriations, in FY 2006-2007 foreconomic development programs,including $29.6 million from the GeneralFund and $4.2 million from other funds.The largest portion of this funding is a$15 million supplemental appropriationfor the biotech/medical genomicsresearch partnership between theUniversity of Minnesota and the Mayo

Foundation. The increase brings totalfunding for this effort to $30 million forthe biennium. In addition, Chapter 282included General Fund appropriations of$11.5 million for steel mill infrastructureand other minerals projects; $1.7 millionfor the Minnesota Film and TV Board;and $1.5 million for various otherprojects.

Clean Water Legacy FundingA total of $25.0 million was provided inFY 2006-2007, on a onetime basis, forClean Water Legacy programs,including $15.0 million in General Fundappropriations, $9.1 million from bondproceeds, and $640,000 from theEnvironmental Natural Resources TrustFund. The funding, which is describedin more detail in subsequent chapters,will be allocated to programsadministered by various agencies,including the Pollution Control Agency;the Department of Natural Resources;the Board of Soil and Water Resources;the Department of Agriculture; and thePublic Facilities Authority.

Veterans ProgramsSupplemental appropriations of $3.5million for FY 2006-2007 includedadditional funding for state soldiersassistance program grants, for serviceenhancement grants to fund countyveterans service offices, for a newinitiative to establish veterans assistanceoffices on the campuses of public highereducation institutions, and for otherprograms. All these programs are to beadministered by the Department ofVeterans Affairs. In addition,supplemental appropriations totaling$10.5 million in FY 2006-2007 wereapproved for program funding shortfallsand for a quality assurance initiative for

10

programs administered by the VeteransHorne Board.

Health and Human ServicesFY 2006-2007 appropriations for healthand human services programs wereincreased by $129.9 million relative toamounts forecast in February 2006,including $115.0 million in GeneralFund increases. Most of the additionalfunds are to cover projected budgetshortfalls in state-operated servicesprograms administered by theDepartment of Human Services. Newfunding was provided for severalprograms, including various mentalhealth initiatives, pandemic flupreparedness, restoration of previouslyenacted reductions for the provision ofdental services to low-incomeindividuals,. additional child carefunding, and other initiatives.

Sports StadiumsThe consideration of authorizinglanguage for new collegiate andprofessional sports stadiums receivedsignificant public and legislativeattention during the 2006 session andtwo stadiums were approved.

Chapter 247 provided funding for a new50,000-seat football stadium to beconstructed on the Minneapolis campusof the University of Minnesota. The$248 million stadium will be funded 55percent from state General Fundappropriations and 45 percent fromUniversity-generated sources, includingdonations, naming rights, student fees,and parking revenues. General Fundappropriations of up to $10.25 millionannually for 25 years are expresslyconditioned on the University's offer toconvey 2,840 acres ofUniversity-owned

land at U-More Park to the state. Moredetail on the parameters of the stadiumfinancing and the land conveyance arefound in "Gopher Stadium" section ofthis review.

The 2006 Legislature also authorized thefinancing, construction, and operation ofa new Major League Baseball stadium inMinneapolis for the Minnesota Twins.Chapter 257 established the MinnesotaBallpark Authority to carry out thepurposes of the enabling legislation.Total construction costs for the 42,000seat, open-air stadium were estimatedduring the legislative session to be $522million. Of that amount, the MinnesotaTwins are expected to contribute $130million, with the remainder coming fromlocal sources. Hennepin County wasauthorized to impose a 0.15 percent localsales tax to fund construction costs,land-site improvements, publicinfrastructure improvements, and otherqualifying costs as specified in the law.

Materials purchased for the constructionof both stadiums were exempted fromthe state general sales and use tax. Inaddition, Chapter 257 also included astate sales and use tax exemption on thesale of tickets to games and eventssponsored by the Minnesota State HighSchool League.

PensionsChapter 277 made significant changes topublic employee retirement and pensionprograms, including placing a fivepercent cap on annual increases inpostretirement benefits for participantsof the Minnesota Post RetirementInvestment Fund, altering theaugmentation rate for deferred annuities,and providing for the merger of the

11

Minneapolis Teachers Retirement FundAssociation (MTRFA) into the TeachersRetirement Association (TRA). Themerger of teacher retirement programswill result in increased appropriationsfor general education aid beginning inFY 2008 (see K-12 Education section).In addition, Chapter 277 also madechanges to employee and employercontribution rates, which will be phasedin over time. While no additional fundswere appropriated for state agencies tocover the increased employercontribution rates for state employees,the increased contributions will result inbudget pressures for state agencies overtime.

Eminent Domain LawsSubsequent to the recent United StatesSupreme Court ruling in the case ofKeto v. New London, the MinnesotaLegislature reviewed and enacted avariety of reforms to the state's EminentDomain law. Key changes to the lawpertained to the definition of public useor purpose, liability for the payment ofattorney fees, the computation ofappraisal fees and other costsand compensation, and negotiationrequirements.

FY 2008-2009 General Fund StatusThe 2006 February Forecast projected apositive General Fund balance of $1.091billion for FY 2008-2009, not includingthe $88.4 balance projected for FY2006-2007.

As summarized in Table 6, the ongoingbudget impacts of the provisions enactedin 2006 are expected to lower thatbalance to $736.8 million, reflecting anet spending increase of $348.6 million,tax reductions of $115.7 million, andtransfer of remaining tax relief accountbalance of$109.7 million.

The projected balance of $736.8 milliondoes not account for the potentialGeneral Fund budget pressures resultingfrom price inflation or the potential forpassage of a constitutional amendmentto dedicate all of the motor vehicle salestax revenues, some of which arecurrently deposited into the GeneralFund, to transit and transportationpurposes.

Using the inflation estimates from theFebruary Forecast-l.9 percent for FY2008 and 2.0 percent for FY 2009price inflation would amount to $955million for FY 2008-2009. Adoption ofthe proposed constitutional amendment,to be voted on in November 2006, wouldreduce General Fund revenues by $172million for FY 2008-2009.

Table 6Summary of FY 2008-2009 Geueral Fund Changes

(dollars in millions)

Balance (Feb. 2006 Forecast)

e islative Chan esAppropriation Increases (a)Non-Tax Revenue Increases (b)

Net Spending Increases (a-b)Tax ReductionsTransfer ofRemaining Tax Relief AccountTotal Uses

ro·ected Balance**Does not account for inflation or the possible loss ofGeneral Fund revenuesfrom the motor vehicle sales tax.

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2006 STATE TAX REVENUES CHANGES

Tax revenues account for 92 percent ofall General Fund revenues and fluctuatewith changes in the economy and taxlaw changes. As summarized in Table 1,relative to the FY 2006-2007 budgetenacted in 2005, General Fund revenuesare now expected to be 702.8 millionhigher due to forecast changes and $92.2million lower due to tax reductionsadopted by the 2006 Legislature.

Chapter 259, the Omnibus Tax Act,contained no significant revenue-raisingprovisions. No changes were made tomajor state taxes deposited into otherfunds - such as the gas tax, solid wastemanagement tax, or motor vehicle taxes- but some changes have implicationsfor other funds. Nontax dedicatedrevenues and transfers are discussed inthe relevant chapters.

Table 1General Fnnd Tax Revennes, FY 2006-2007

(dollars in thonsands)

Tax TypeIndividual Income

Corporate Income & Bank Excise

Sales

Motor Vehicle Sales

Statewide Property

Estate

Alcohol

Cigarettes and Tobacco

Taconite

Mortgage Registry

Deed Transfer

Insurance Gross Earnings & Fire Marshal

Controlled Substance

Other Gross Earnings

Lawful Gambling

Medical Assistance Surcharges

Income Tax Reciprocity

Other - Motor Vehicle Registration, FurClothing Gross Receipts

Compliance Revenues

Other Tax Refunds

Total Tax Revenues

2005SessionEnactedBudget

13,515,618

1,505,1958,905,865

530,9501,291,202

176,000

135,442387,869

4,650236,900

239,100

591,430

40100

119,520404,785110,660

2,184

90,700(56,274)

28,191,936

13

Feb. 06ForecastChanges

102,482336,905208,024(27,287)

2,705125,000

4,5(6,007)

(650)48,700

12,800(4,730)

(20)o

(14,630)

3,0296,701

29

The following tables and text summarizestate revenue changes made by the 2006Legislature, including, Chapter 259, theOmnibus Tax Act; Chapter 247, theUniversity of Minnesota FootballStadium; Chapter 257, the TwinsBaseball Ballpark in Hennepin County;and Chapter 217, the Fire SafetySurcharge and Account.

See the chapters on Stadiums foradditional information on provisionsrelated to the University of MinnesotaFootball Stadium and the TwinsBallpark in Hennepin County.

Table 1aIndividual and Corporate Income tax Changes - General Fund

2006 Legislative Session(dollars in thousands)

FY 2006-07 FY 2008-092006 Session 2006 Session

Tax Provisions Enacted Changes Enacted Changes

Income Tax

Federal Conformity Energy Incentives (620) 40

Federal Conformity Gulf Zone (225) (40)

Federal Conformity Katrina (3,795) 65

Federal Conformity Married Standard Deduction (28,700) (21,300)

Tax Increase Prevention & Reconciliation Act 65 675

Alternative Minimum Tax (23,800) (59,900)

Active Military Income Credit (8,100) (4,600)Bovine Testing Credit (390) (390)

Income Tax Subtotal (65,565) (85,450)

Corporate Income & Bank Excise TaxFederal Conformity Energy Incentives (1,940) (6,740)

Federal Conformity Gulf Zone (710) (220)

Federal Conformity Katrina (440) (10)

Tax Increase Prevention & Reconciliation Act 180 670

Corporate Tax Subtotal (2,910) (6,300)

FEDERAL CONFORMITY

Because Minnesota uses federal taxableincome as the starting point fordetermining state income tax liability,changes to federal taxable income aretypically adopted by Minnesota. Thefollowing federal law changes wereadopted for Minnesota income taxpurposes:

14

• The Tax Increase Prevention andReconciliation Act of 2005 (TIPPA)extended the dividend and capitalgains tax rate cuts for two moreyears beyond 2008, increased thealternative minimum exemption forindividuals, extended small businessexpensing thresholds, and changedincome limitations on Roth IRAconversions.

• The Energy Tax Incentives Act of2005 provided for the acceleration ofthe deduction of capital expendituresfor companies providing energy andenergy services.

• The Katrina Emergency Tax ReliefAct of 2005 provided additional taxrelief to victims of Hurricane Katrinaand tax incentives for individualsand corporations to make charitablecontributions after August 25, 2005,and before January 1,2006.

• The Gulf Opportunity Zone Act of2005 extended disaster tax relief tovictims of Hurricanes Rita andWilma and allowed additionalsection 170 expensing or 50 percentbonus depreciation on businessproperty placed in service in theareas damaged by Hurricane Katrina.

INCOME TAXES

Married Standard DeductionIn the Working Family Tax Relief Act of2004, Congress made permanent afederal married standard deductionamount that is double the amount forsingle filers. To conform to the federalstandard, the Minnesota standarddeduction was increased to twice thestandard deduction allowed for singletaxpayers for tax years 2006 andfollowing. This change also eliminatedthe disparity between federal and statedeductions affecting married itemizerswho deduct state income taxes on thefederal return.

Alternative Minimum TaxThe alternative minimum tax (AMT)exemption was increased by 50 percent,from $40,000 to $60,000 for marriedjoint returns, from $20,000 to $30,000

15

for married separate returns, and from$30,000 to $45,000 for single and headof-household returns, effective in taxyear 2006. The provision alsoeffectively expands the range of incomeover which the exemptions are phasedout. For 2007 and future tax years, theexemption amounts are indexed forinflation.

Active Duty Military CreditThe active duty military credit allows arefundable credit equal to $59 for eachmonth of service to Minnesota taxpayerswho were in active military service in adesignated combat zone or hazardousduty area after September 11, 2001. Ifeligibility for the credit results fromservice between September 11, 2001,and December 31, 2005, the credit maybe claimed in tax year 2006.

The surviving spouse or dependent childof a Minnesota resident killed while inactive military service in a designatedarea may claim the credit.

Bovine Testing CreditThe bovine testing credit allows arefundable credit against the individualincome tax or corporate franchise taxequal to one-half of the expensesincurred during the year for testing forbovine tuberculosis to an owner of cattlein Minnesota.

SALES AND EXCISE TAXES

June Accelerated Sales andExcise TaxThe requirement that taxpayers with anannual liability of $120,000 or more pay85 percent of their estimated June salestax before the end of June was reducedto 78 percent for the general sales tax,

the cigarette tax, the tobacco productstax, and taxes on alcoholic beverages.The numbers for the cigarette tax andtobacco products tax included both theexcise tax and the health impact fee.

Local Option Sales TaxesThe cities of Austin, Baxter, Brainerd,and Owatonna were granted authority toimpose a one-half of one percent localsales and use tax, subject to voterapproval.

Chapter 257 authorized HennepinCounty to impose a 0.15 percent localsales and use tax without referendum topay for its portion of the Twins Ballpark.

Sales Tax ExemptionsBoth the University of MinnesotaStadium and the Hennepin CountyBallpark Acts contained sales taxexemptions for the purchase of materialsused for the construction of the GopherFootball Stadium and the TwinsBallpark. The University of MinnesotaStadium Act also provided a sales taxexemption for ticket sales to high schooltournament games, events, and activitiesafter June 30, 2006, and before July 1,2016. (See the Stadium chapters of theFiscal Review.)

Table IbSales and Use and Excise Tax Changes - General Fund


Tax Provisions FY 2006-07 FY 2008-09

Sales and Use Tax

U ofM Stadium Construction Materials 0 (5,000)

Twins Ballpark Construction Materials

~(9,500)

High School League Ticket Sales (1,060)

Reduce June Acceleration (1,930)

Various Exemptions (120) 2,380

Subtotal Sales and Use Tax (21,450) (15,110)

Alcohol Excise Tax

Reduce June Acceleration (400) (10)

Cigarettes and Tobacco Excise Tax

Reduce June Acceleration* (1,340) 25

*Note: A portIOn of the reduced June accelerated payment of CIgarette and tobacco sales and eXCIse tax«s IS

reflected in Table 1c.

16

Table IcOther Tax Revenue Changes - All Funds


FY 2006-07 FY 2008-092006 Session 2006 Session

Tax Provision Enacted Changes Enacted Changes

General FundRepeal Fire Insurance Tax* (Ch. 217) 0 (8,400)

Transfer from Fire Safety Acct. (Ch.217) 0 2,736

Reduce Fire Marshal Program Appropriations (Ch. 217) 0 5,664

Subtotal for Chapter 217 Changes 0 0

Taconite Occupation Tax - Repeal AMT (550) (550)

Health Impact Fund Transfer-In June Acceleration (1,360) (25)

Medical Assistance(MA) Surcharges Chapter 282** 0 101

Total General Fund (1,910) (474)

Health Impact Fund Reduce June Acceleration (1,360) (25)

Special Revenue Fund - Fire Safety AccountInsurance Surcharge of 0.65% 0 19,000

Transfer to General fund 0 (2,736)

Base Funding for Fire Marshal Program 0 (5,664)

Total Special Revenue Fund 0 10,600*Chapter 217 repeals the fire msurance tax and authonzes a fire safety surcharge deposIted mto a specIalrevenue account. Transfers from the special revenue fire safety account and reduction of the General Fundappropriation for the Fire Marshal Program result in no net impact to the General Fund.**Chapter 282 provides for a nursing facility moratorium exception that generates MA surcharge revenue.The associated spending is in the Health and Human Services budget.

OTHER TAXES

Fire Safety Surcharge and AccountChapter 217 repealed the 0.5 percentgross premium tax on fire insurance. Inits place, a 0.65 percent surcharge waslevied on premiums for homeowner,commercial fire insurance, and forcommercial nonliability policies. A newfire safety account was created in theSpecial Revenue Fund, with proceedsfrom the surcharge deposited into thataccount.

17

Under previous law, the gross premiumstax was generating more General Fundrevenue than was being appropriated forthe Fire Marshal Program. Therefore, tohold the General Fund harmless, aportion of future revenues to the newSpecial Revenue Fund account will betransferred back to the General Fund.

In fiscal year 2008, $468,000 istransferred from the fire safety accountto the General Fund, and $2,268,000 istransferred in each subsequent year.Beginning with fiscal year 2008, thebase funding for the Fire MarshalProgram from the fire safety account is

$2.832.000 for each year. Accordingly,the General Fund base appropriation forthe Fire Marshal Program is reduced by$2,832,000 each year.

The Commissioner of Public Safety isresponsible for administering theprogram, and is authorized to spend thefunds in the fire safety account foractivities and programs recommended bya Fire Service Advisory Committee, asestablished by Chapter 217. Thecommissioner must also provide anannual accounting to the Legislature onhow funds in the fire safety account areused.

MineralsThe Omnibus Tax Act modified themining occupation tax applied to ironores, taconite, and noniron ores byreducing the rate from 9.8 percent to2.45 percent. Transfers of iron ore andtaconite are deemed to be Minnesotasales. The tax act also repeals thealternative minimum tax that applies totaconite and other mineral producers.The distribution of taconite productiontax revenues was modified, and surplusmoney in the taconite homestead creditaccount was allocated to variousinfrastructure projects in the tax reliefarea.

For more information on the fiscalactions related to State Tax Revenue,contact Susan Von Mosch,[email protected] Michelle Allen,[email protected]

18


19

ELEMENTARY AND SECONDARY EDUCATION

Spending for E-12 education increased$13.0 million in FY 2006-2007 fromlegislative policy changes, including$8.2 million for K-12 education and $4.8million for early childhood and familyeducation programs (see separate chapteron Early Childhood Education).Property tax levies were increased byless than $1 million each year for taxespayable in 2007 and 2008 relative to theFebruary forecast.

As shown in Table 2, K-12 spending hasgrown by over $800 million since theconclusion of the 2005 legislativesession, due to previously enacted lawsproviding for the automatic buy-back ofeducation aid and property taxrecognition accounting shifts amountingto over $790.0 million in increasedspending.

Table 1K-12 Education Spending Changes-General Fund

2006 Legislative Session(in thousands)

FY 2006-2007 FY 2008-2009on

Expansion of AP/IB programs 1,000TIMS: International Coop. Achievement 500Mandarin Chinese project 250Waseca Health and Safety Rev Recovery 316Expand Participation in Q.Comp (9) (18)Extend Q.Comp Transition Period (158)Northwest on-line College in High School 50Onetime Emergency Aid-Red Lake 474Onetime Emergency Aid-Ricori 137 53School lunch food storage program 495 1,008Scholars ofDistinction 25Character Education 1,500Onetime Heating Assistance 3,495Health & Safety Levy-Testing/Balancing 14General Education Aid-Pension Reforms 34,227

Total General Fund Chanszes 8,233 35,126

Education Aid/Property TaxRecognition Shifts EliminatedThe most significant change in K-12funding since 2005 was the eliminationof shifts in education funding used tobalance the state budget in prior years.In 2004, the Legislature enacted aprovision (Minnesota Statutes, sectionl6A.152, subdivision 2) that requiredspending to buy back the K-12 shiftsautomatically when a forecast projected

20

a positive unrestricted General Fundbalance, commonly .referred to as asurplus.

Those shifts were partially reduced withthe November 2004 and February 2005forecasts, and have now been completelybought back with the November 2005and February 2006 forecasts, whichestimated a positive balance of $701million and $181 million respectively.

The entire $701 million from theNovember forecast was used to buy backthe balance of the school aid paymentshift and a portion of the property taxrecognition shift. When the Februaryforecast estimated a positive balance of$181 million, the first $93.4 million paidthe remaining balance of the property taxrecognition shift, leaving a positiveGeneral Fund balance of $88 million.

GENERAL EDUCATION

Onetime Energy Assistance AidIn FY 2006, the Legislature providedevery school district and charter schoolwith a onetime aid increase of $3.67 peradjusted marginal cost pupil unit(AMCPU). The total aid statewide is$3.5 million and was designed to be aresponse to the increased energy coststhat districts experienced throughout thepast school year. Districts may use thisaid to pay for heating, fuel, or otherenergy-related costs.

Alternative Teacher CompensationThe Legislature made two adjustmentsto the alternative teacher compensationprogram. In both cases, theseadjustments created savings to thegeneral education program. The firstchange extended the transition periodduring which districts change from theold alternative compensation program tothe new Q. Comp-based program.Under current law, districts wereallowed a two-year transition period.The changes allow districts four years,or until FY 2009, to fully convert to theQ. Comp program. This change creates$158,000 in general education aidsavings for FY 2008-2009, but has noeffect in the 2006-2007 biennium.

21

The second change makes both thePerpich Center for Arts Education andMultidistrict Integration Collaborativeseligible to participate in the alternativecompensation program. These schoolswere not eligible under the original Q.Comp program language. This changesaves $9,000 in FY 2006-2007. Theseprovisions also will reduce property taxlevies by $1.1 million and $1.2 millionfor taxes payable in 2007 and 2008,respectively.

Teachers Retirement AssociationPension Offset ReductionChapter 277, the Retirement and PensionAct, merges the Minneapolis TeachersRetirement Fund Association (MTRFA)into the Teachers RetirementAssociation (TRA) as of July 1, 2006.All MTRFA assets will be transferred tothe investment authority of theMinnesota State Board of Investment.All Minneapolis retirees will betransferred into the Post RetirementFund. Further, TRA active members areprovided a formula multiplier benefitincrease of 0.2 percent for all years ofservice after FY 2006.

Several revenue sources over a 30-yearperiod are required to pay for theMTRFA unfunded liability and thebenefit increase for existing members.Of primary importance to K-12 finance,the new pension law reduces the TRAreduction that exists in current law,resulting in a state general education aidincrease for school districts. This changeis effective for fiscal year 2008 andrepresents an increase in state aid forschool districts equal to 0.5 percentof eligible FY 2007 salaries. As aresult, general education expendituresassociated with this provision willincrease by $17.0 million in FY 2008

and $17.2 million in FY 2009. Theentire pension proposal is examined ingreater detail in the Pensions Chapter.

EDUCATION EXCELLENCE

Character Development Revenue PilotProgramFor FY 2007 only, the Legislatureapproved a $1.5 million appropriationfor a character development educationrevenue pilot program. Districtsparticipating in the program will receive$30 per AMCPU to purchase characterdevelopment education curriculum.

Onetime Advanced PlacementRevenueThe Legislature also approved $1million in FY 2007 for grants to schooldistricts and charter schools to raiseacademic achievement through increasedparticipation in preadvanced placementand advanced placement programs.School districts must apply to theDepartment of Education for grants thatare to be awarded to eligible districts ona geographically equitable basis. Grantawards are limited to the lesser of (1)$85 times the number of enrolled pupilson October I of the previous year or (2)the approved supplemental expendituresin the applicant's proposed budget.

FACILITIES, ACCOUNTING, ANDTECHNOLOGY

Health and Safety ExpansionDuring the 2003 legislative session, theLegislature substantially curtailed thetypes of available uses on which schooldistricts were able to spend health andsafety revenue. In the intervening threeyears, several school districtsapproached the Legislature about someof the impacts of the 2003 policy

22

changes and, in 2006, the Legislatureagreed to allow air quality testing andbalancing to again be an acceptable useof health and safety revenue. This newpolicy has no state-aid impact in the FY2006-2007 biennium and is projected tocarry a state-aid increase of $14,000 inthe FY 2008-2009 biennium. Health andsafety levies are projected to increase by$2.5 million and $1.8 million for taxespayable in 2008 and 2009, respectively.

Emergency AidThe Legislature provided direct aid tohelp repair infrastructure damage atIndependent School District No. 38, RedLake. The FY 2006 emergency aidappropriation originally provided by the2005 Legislature was increased from$50,000 to $524,000, consistent with adetailed cost projection outlined at therequest of the Legislature.

Independent School District No. 750,Ricori, received a $137,000 emergencyaid appropriation in the 2006-2007biennium to support activities relating tothe recovery from a school shooting intheir district. The Rocori School Districtalso qualifies for a $53,000appropriation in FY 2008 only.

NUTRITION

The Legislature increased the schoollunch reimbursement from ten cents to10.5 cents per lunch in FY 2007. Thispermanent change increased the schoollunch appropriation by $495,000 in FY2007 and increased the planningestimates in FY 2008-2009 for nutritionby $1 million.

Table 2 displays "all funds" bydepartment. Buy back of the K-12 shiftremains the primary General Fundbudget change for the last year. Federal

funds always experience forecastingchanges year to year, but none were ofnote.

69

22,5143,72

1,227,28

13,199,7

14,493,94

664

3,486

2

24

640

6,533

2,8466,533

793,772

803,125

793,7

803,791

Forecast Feb. 2006Changes Forecast

Amounts

14,826

22,519

130

3,13

530

472

694

52

34

1,39813,246

37,189

25,576

21,93

17,983

37,189

1,223,797

1,223,273

12,405,950

12,370,772

13,649,747

13,690,149

OriginalBudget

(Enacted 2005)

Table 2FY 2006-2007 Biennial Spending by Agency and Fund-All Funds

Elementary and Secondary Education(dollars in thousands)

enc !Fund

General Fund

General Fund

Gift FundFederal Fund

Special Revenue Fund

Federal Fund

S ecial Revenue Fund

Federal Fund

Federal Fund

Gift Fund

Gift Fund

General Fund

Permanent School Fund


Gift Fund

Special Revenue FundGeneral Fund

Endowment & PermSchool Fund

enter for Arts Education

und Totals

enter for Arts Educationotal

ept. of Education Total

e artment of Education

aribault Academies

otal All Funds

aribault Academies Total

The 2006 Legislature increased thepermanent school fund by $9,000 as aresult of a minor policy change in theenvironment and natural resourcesbudget area.

Table 3 displays "all funds" by K-12budget function. Forecast changes occurevery year, but none are of particularnote.

23


14,493,94803,791

ForecastChanges

13,690,149

OriginalBudget

(Enacted 2005)

era1 Education 100,362 (1,788) 98,57

Table 3FY 2006-2007 Biennial Spending by Function-All Funds

Elementary and Secondary Education(dollars in thousands)

Education Program 11,787,766 774,005 12,561,771

DE, Agency Budget 62,827 747

enter for Arts Education 14,826 664

ducation Excellence 264,076 (3,365) 260,71

aribault Academies 25,57 2

acilities and Technology 97,292 (3,277) 94,01Special Education 1,286,058 34,560 1,320,61

E-;;'utn=·ti:.:.on=-=-P::c:ro:.;;;gr:::.::am=s -+ ----:2:.:;8:2.:,2::-=2:..::t- ...:.1:.z;,6:.::3:..::6j-__.....:2~9,85ibraries 23,14 607

SPECIAL EDUCATIONMAINTENANCE OF EFFORT

reallocation of funds to minimize thatrisk.

In 2006, the Legislature adoptedlanguage in the education policy bill toprotect the state and school districts fromlosing federal funds as a result of afederal maintenance of effort (MOE)requirement. Under this federal law,state expenditures on special educationare not allowed to decline year to year.If they do, the federal governmentimposes a financial penalty bywithholding federal funds. For FY 2006,the state must spend $655.3 million forspecial education and related services.Based on the February forecast,appropriations available to satisfy thefederal MOE requirement for that yearwere only $37,000 above the federalrequirement. This represents a smallmargin of potential forecasting error thatcould risk a loss of federal funds. Toensure that the state would meet itsMOE and guarantee that it not losefederal funds due to underestimations,the Legislature instituted an automatic

State special education expendituresused to calculate the federal MOEinclude regular special education aid,transition for disabled students, travel forhome-based services, aid for studentswith disabilities, court-placed specialeducation, and out-of-state tuition.Under the 2006 change, if the totalexpenditures from these programs areprojected to be less than the amountpreviously forecast, the excess fromthese programs, up to an amountsufficient to meet federal specialeducation MOE, is reallocated to thestate total regular special education aidto maintain the state's special educationeffort and reduce the risk of a federalpenalty.

Alternately, if the expenditures listedabove are projected to be greater thanpreviously forecast, and an addition tostate total special education aid has beenmade consistent with this section of law,

24

the state total special education aid mustbe reduced by the lesser of the amount ofthe expenditure increase or the amountpreviously added to state total specialeducation aid. This amount must beallocated back to the programs that wereforecast to have an excess.

This process of reallocation willminimize the risk to the state of losingfederal funds as a result of not meetingthe special education MOE requirement.The provision carries no fiscal impactand applies only to the current biennium.

For more information on the fiscalactions related to Elementary andSecondary Education, contact EricNauman, Eric.Nauman(jJ)senate.mnor Shelby McQuay,[email protected]

25

EARLY CHILDHOOD EDUCATION

Early Childhood Education provIsIonswere enacted in Chapter 282, Article 2,which increased General Fundappropriations by $4.8 million for FY2006-2007 for early childhood andcommunity education programs. Thechanges represent a three percentincrease in funding over amountsappropriated in 2005 for these programs.Adjustments in the February 2006forecast increased funding for theseprograms by $2.8 million.

Article 2 also provided for supplementalGeneral Fund appropriations of $7.9million, a 22 percent increase, toimplement changes to the Basic SlidingFee (BSF) child care program.

Federal Child Care Development fundsalso increased by $5.1 million, a sevenpercent increase over amounts providedin 2005.

Finally, Article 2 included a $250,000appropriation to the LegislativeCoordinating Commission (LCC) toestablish a legislative commission to endpoverty in Minnesota, along withguidance relating to the administrationof the commission.

Table 1Early Childhood Education Spending Changes-General Fund*


FY 2006-2007 FY 2008-2009Denartment of Education

Health & Development Screening Aid 143 53Early Childhood-Part C Eligibility 400 6,931ECFE Formula Increase 2,680 5,841Kindergarten Readiness Assessment 287 574Quality Rating System-MELF (Vetoed) [1,000]**Educate Parents Partnership 80 10CAdult Basic Education Formula *** ***Adult Literacy Grants 1,250 1,250

lDeoartment ofHuman ServicesBasic Sliding Fee-Increase Reimbursement Rate 3,400 9,39EBSF Child Care-Accreditation Bonus 609 1,79EBSF Child Care-Absent Day Policy 46 24EBSF Child Care-Reduce Waiting Lists 3,842 7,684BSF Child Care-Administration Costs 3el!islative Coordinatinl! CommissionEstablish Commission to End Poverty 250

Total General Fund Changes 12,990 33,871*No changes were made to nongeneral funds.** Provision was vetoed by Governor, not included in total.*** The Legislature approved an increase in the formula but due to a drafting error, the appropriations

amount was not revised.

26

Early Childhood and FamilyEducationFunding for Early Childhood FamilyEducation (ECFE) programs increased$2.7 million for FY 2006-2007,increasing the amounts distributedthrough the ECFE formula from $104 to$112 multiplied by the greater of thenumber of residents under age five or by150. There were no changes to theproperty tax levy portion of this aid-levyprogram.

Other supplemental appropriations forearly childhood programs included:

• $287,000 to implement a voluntarykindergarten readiness assessmentprogram that produces representativeresults in incoming kindergartners inMinnesota. The program will bebased on an earlier study completedby the Department of Education;

• $143,000 to correct a drafting errorin the 2005 legislation relating toDevelopmental Screening Aid byclarifying that such aid is available toconduct screening for childrenentering kindergarten if they havenot previously been screened;

• $80,000 to participate In apublic/private partnership withhealth care providers and communityorganizations. The Educate ParentsPartnership will distributeinformational materials to parents ofnewborn children before they leavethe hospital, including informationabout parenting, child development,and resources that may be availableto provide assistance with child careand other services; and

27

• $400,000 to implement requiredfederal changes to Minnesota EarlyChildhood Special Education (PartC)programs.

Minnesota Early LearningFoundationChapter 282, Article 2, provided aonetime appropriation of $1 million tothe Minnesota Early LearningFoundation to evaluate the effectivenessof the proposed NorthStar QualityImprovement and Rating System and toreport its findings to the Legislature in2008. This provision was vetoed by theGovernor.

Adult and Community EducationChapter 282 modified the Adult BasicEducation Aid formula to provide anadditional $1.1 million in FY 2006-2007by providing for annual indexing of theformula up to a maximum three percentincrease based on funding in theprevious year. However, due to adrafting error, the appropriation for thischange was omitted from Chapter 282,Article 2. It is expected that additionalfunding for the increase in the formulawill be addressed in the 2007 legislativeseSSIOn.

Further, $1.25 million for fiscal years2007 and 2008 was provided for a grantprogram to provide literacy education torecent immigrants. This funding is toaccommodate services for anunanticipated increase in the number ofrefugees and immigrants.

All of the above provisions will beadministered by the Department ofEducation.

Table 2FY 2006-2007 Biennial Spending by Agency and Fund - All Funds

Early Childhood Educationdollars in thousands

Original ForecastBudget Changes

(Enacted 2005)Department of Education

General Fund

Department of Human ServicesGeneral Fund

Federal Funds- CCDFTotal Human Services

LCCGeneral Fund

Fund TotalsGeneral FundFederal Funds - CCDF

Total All Funds

172,239

36,073

78,215114,288

°208,312

78,215286,527

2,833

2,833

2,833


175,072

36,07378,215

114,288

°211,145

78,215

289,360

Basic Sliding Fee (BSF) ChildCareSeveral changes to the BSF childcare program were enacted in2006. These changes will increaseGeneral Fund funding by $7.9million. The changes include:

The changes to the BSF child careprogram also affect the MFIP andtransition year child care assistanceprograms. These changes arefunded in the Health and HumanServices article of Chapter 282.(See Health and Human Servicessection.)

•

•

$3.4 million to increasereimbursement rates for childcare providers by six percentover the levels in effect onJanuary 1, 2006;

$609,000 to establish anaccreditation incentive for childcare providers, which allowsfor an additional 15 percentincrease in the reimbursementrate for accredited providers;

•

•

$46,000 to change the absentday policy for BSFparticipants. The policy waschanged to clarify the paymentsystem for absent days; and

$3.8 million to reduce thenumber of families on waitinglists throughout Minnesota toreceive child care assistancethrough the BSF program.

28

Table 3FY 2006-2007 Biennial Spending by Function

Early Childhood Education(dollars in thousands)

OriginalBudget

(Enacted 2005)Department of EducationEarly Childhood & FamilySu ort ServicesCommunity Education

elf-Sufficiency and LifelongLearninDepartment of Human ServicesChild Care (BSF Program)

LCCCommission to End Poverty

Total

93,392

5,339

73,508

114,288

o286,527

ForecastChanges

477

274

2,082

2,833


For more information on the fiscalactions related to Early ChildhoodEducation, contact Dennis Albrecht,[email protected]

29

HIGHER EDUCATION

Chapter 282, the Omnibus Supplemental.Budget Bill contained various provisionsproviding funding for higher educationprograms. Most provisions are contained inArticle 8 of Chapter 282.

In addition, Chapter 258, the CapitalInvestment Act, contained numerousfunding provisions for higher educationcapital projects, and Chapter 247 providedfor a new football stadium on the UniversityofMinnesota Twin Cities campus.

Table 1Higher Education Spending Changes-General Fund*

2006 Legislative Session(in thousands)

FY 2006-2007 FY 2008-2009

Rochester Higher Education Programs 5,000 11,33C*No changes made to other funds tracked by this ReVIew; legIslative changes made to thelimits for SELF Loans, accounted for by the Office ofHigher Education, are estimated to increaseloans by $9.0 million in FY 2007 and by $26.0 million in FY 2008-2009.

The 2006 Legislature adopted legislation toestablish a branch campus of the Universityof Minnesota in Rochester and appropriated$5,000,000 for program planning anddevelopment in FY 2007. The funding basefor activities to support future programdevelopment and course offerings at theRochester campus are $5,000,000 for FY2008 and $6,330,000 for FY 2009.

Under the provisions of the bill, theUniversity is directed to expand programofferings at the campus that support theunique educational and economicdevelopment needs of the region. Theprograms offered at the Rochester campusshould reflect the University's uniquemission of teaching, research, and service;and the University must workcollaboratively with other higher educationinstitutions in the region in developingprogram offerings and avoid unnecessaryduplicative program offerings.

30

In addition, Article 8 of Chapter 282:

• expanded eligibility for state-fundedfinancial aid to include active militarypersonnel stationed in Minnesota, theirspouse, and dependents; as well asindividuals who have relocated toMinnesota from a presidentially declareddisaster area and individuals meeting thedefinition of "refugee" under the UnitedStates Code;

• increased the loan limits and lengthenedrepayment period for StudentEducational Loan Fund participants. Theaggregate principal amount of loansmade under the program for anundergraduate student must not exceed$34,500 through June 30, 2007, and$37,500 after June 30, 2007. Theaggregate principal amount of debt astudent can incur to complete both

•

undergraduate and graduate degreescannot exceed $52,500 through June 30,2007, and $55,500 after June 30, 2007;and

increased the income from thepermanent University fund allocatedannually to the Natural ResourcesResearch Institute and studentscholarships, from $25,000,000 to$50,000,000.

Minnesota and the Mayo Foundation forresearch in biotechnology and medicalgenomics.

Article 14 of Chapter 272, the StateGovernment Finance Article, appropriated$600,000 to provide a central liaison staffperson and campus staff to serve the needsof veterans enrolled at public and privatecolleges and universities throughout thestate.

Further, Article 11 of Chapter 282, theEconomic Development Article,appropriated $15,000,000 to support thework of the collaborative researchpartnership between the University of

Biennial spending and appropriationamounts are delineated in Table 2. Biennialspending and appropriations by function areoutlined in Table 3.

Table 2FY 2006-2007 Biennial Spending by Agency and Fund All Funds

Hi her EducationOriginal Forecast Feb. 2006Budget Changes Forecast

(Enacted 2005) Amounts

349,31 485

8,795358,795 485

1,202,888

1,205,7704,314

41,461,251,54

2,78

2,761,00 4858,7954,314

42,154 3,0062,816,263 3,491

31

Table 3FY 2006-2007 Biennial Spending by Function

Higher Education(in thousands)

2

All Funds

2,002,04

6,76

25

3,503,208,79

18,01

34,75

281,15

104,271,150,281,202,88

2,819,75


3,491

495

ForecastChanges

3,5023,2008,795

25

6,282

2301,61

2,02,04

18,012

34,756

104,27

281,150

1,202,8881,147,274

2,816,263

OriginalBudget

(Enacted 2005)

ofM SpecialsofM OperationsnSCD Operationsedical Education

ursing Education

dministration-OHE

hildcare/Work Study

ochester Higher Education

echnology Infrastructure

uition Reciprocity

ederal Funds-OHE

State Grant ProgramOutreach

College Savings Programs

Service Learning

For more information on the fiscal actionsrelated to Higher Education, contact MajaWeidmann, Maja. [email protected] orDennis Albrecht,[email protected]

32

HEALTH AND HUMAN SERVICES

Article 22 of Chapter 282 increased FY2006-2007 appropriations from allsources for Health and Humans Servicesprograms by $129.9 million relative tothe February 2006 forecast, including$115.0 million from the General Fund;$5.3 million from the Health CareAccess Fund (HCAF); and $7.9 millionfrom the federal Temporary Assistancefor Needy Families Fund (TANF). Mostof the additional General Fundappropriations are for projected budgetshortfalls in state-operated servicesadministered by the Department ofHuman Services (DHS), includingregional treatment centers, psychiatric

hospitals, treatment programs forsexual psychopaths, and state-staffedcommunity group homes. Table 1a andTable 1b identify the budget changesenacted in 2006.

Prior to 2006 legislative action,projected spending for Health andHuman Services programs had decreasedby $188.1 million relative to the end ofsession 2005, including $67.6 million inlower General Fund spending and$118.8 million from the HCAF. Table 2summarizes spending changes since the2005 special session.

Table laHealth and Human Services Changes-- General Fund


General Fund FY 2006-2007 FY 2008-2009Deoartment of Human Services

Mental Health System Transformation 5,837Mentally III and Dangerous Population Growth 33,576 44,755SOS Sex Offender Commitment Growth 36,316 45,169Expansion of SOS METO Community Treatment 5,306 7,106SOS Salary Deficit 16,117 20,584DEFRA: Federal Deficit Reduction Act Compliance 146 (6,934)Exempt Certain GAMC Enrollees from MNCare 2,119 12,111Pay for Performance for Health Care Providers 75 75Pharmacy Payment Reform Advisory Group 75Critical Access Dental Payments - Dedicated Expense 3,532 1,67"Medicare Part D Gap Funding 4,57CRate Increases for Nursing Facilities near St. Cloud 1,788 3,91Rate Increase for Nursing Facility in Ottertail County 130Rate Increase for Nursing Facility in Martin County 77LTC Facility Moratorium Exception - Crestview 101Temporary Rate Increase for Meeker County DT & H 3CWalker Nursing Facility/Aw Gwah Ching Moratorium Except. 265ICFsIMR Development Plan for Future Services 30Alternative Care Grant Program Funding Shortfall 1,281 399GRB Residential Pilot Project Established 168 336Child Care Max. Provider Rate Adjustment, MFIP 15,114Child Care Accreditation Differential, MFIP 1,724Child Care Absent Day Policy Change, MFIP 62 329

33

!Table la continued FY 2006-2007 FY 2008-2009Adjust MN Food Assistance Program (861) (982)Food Stamp Asset Limit@$7,000 30 244Food Stamp Eligibility Systems Change 16Administrative Federal Funds Participation (FFP) (548) (795)

Department ofHealthPandemic Influenza Preparedness 5,00C

IVeterans Homes BoardConsultant Study Recommendations 357 714Operational Shortfall 759 9,408Quality Assurance 5,122 5,348

!Total General Fund Chanj:tes 115,03~ 166,728

DDS State Operated Services General FundChapter 282 increased General Fundappropriations to DHS by $103.8 millionfor FY 2006-2007. Of that amount,$91.3 million was to fund projected FY2006-2007 budget shortfalls in fourareas related to the department's stateoperated services (SOS), including:

•

•

$33.6 million to fund growth incommitments of mentally ill anddangerous (MI&D) persons to theMinnesota Security Hospital, withan additional 100 units for FY 20062007 and another 100 units for FY2008-2009. In 2005, the Legislatureappropriated funding for 50additional beds over the four yearsfrom 2005 to 2009 to accommodatethe expected growth in MI&Dcommitments, but by 2006 theestimated need for new beds wasrevised upward. The $33.6 millionin new spending is partially offsetby $2.6 million of revenue fromcounty payments for ten percent ofthe cost of services provided topatients.

$36.3 million to fund an additional35 beds per year for the MinnesotaSex Offender Program (MSOP).While MSOP commitments were

34

•

•

previously estimated to grow by 23patients a year, those estimates wererevised upward by the 2006legislative session to 58 new sexoffender commitments annually.

$16.1 million to fund negotiatedsalary increases for employees ofthe MSOP, Minnesota State SecurityHospital, and regional treatmentcenters. While most agencies wereexpected to fund salary increasesfrom existing appropriations, SOShas limited ability to absorb suchincreases because the agency isrequired to maintain specificstaffing levels at its facilities inorderto maintain quality of care anda safe environment.

$5.3 million to fund expectedincreases in the population servedby the Minnesota ExtendedTreatment Options (METO)program, which provides treatmentto people with mental retardationwho are committed by the courtsystem because they present a riskto public safety. The additionalfunds will be used to providecommunity support and crisisservices to this population;previously these services were

funded exclusively from enterprisefunds and third-party insurancecoverage.

Other DBS General Fund ProvisionsThe 2006 Legislature also made changesto various health care and otherprograms, including:

• $75,000 to create a pay-forperformance system for Minnesota'spublicly funded health care programsto reward, with a two percent rateincrease, certain high-performingmedical groups that demonstrateoptimum care in serving enrolleeswith diabetes and cardiovasculardisease.

The increased spending for FY 20062007 is partially offset by savings of$861,000 In the Minnesota FoodAssistance Program (MFAP), whichprovides food support to noncitizensover the age of 50 who are not eligiblefor federal food support. While all

• a net spending increase of $146,000,after adjusting for expected budgetsavings, to cover the upfrontadministrative and computerprogrammIng costs necessary tobring state health care programs intoconformity with the federal DeficitReduction Act (DEFRA) of 2005.The changes, which will reduceGeneral Fund spending by $6.9million in FY 2008-2009, affect lawsrelated to asset transfers, life estatevaluation, verification of citizenship,third-party liability, and theestablishment of a Long-Term CarePartnership program.

• $2.1 million in additional spendingfor General Assistance Medical Care(GAMC) to exempt certain GAMCenrollees from shifting to theMinnesotaCare program as requiredby a 2005 law. The change allowsindividuals to remain in GAMC ifthey would not meet MinnesotaCareeligibility requirements or if theirhealth care needs could have beencompromised by being enrolled inMinnesotaCare. Clients affectedinclude Medicare enrollees with endstage renal disease, people withprivate health Insurance benefits,GAMC enrollees who areincarcerated, and people receivingtreatment through the ConsolidatedChemical Dependency TreatmentFund.

35

•

•

•

$1.8 million for a rate increase fornursing facilities In Benton,Sherburne, and Stearns Counties, toprovide those nursing facilities withan operating rate equivalent to themedian rate of nursing facilities inthe metro area.

$1.3 million to cover one-half of anestimated budget shortfall of $2.6million in the Alternative Careprogram. In 2005, the Legislaturereduced appropriations by theamount expected to be saved throughchanges in program benefits andeligibility levels. Budget savIngsattributable to those benefit changesturned out to have beenoverestimated.

$6.6 million, beginning in FY 20082009, to address workforce shortagesof qualified mental healthprofessionals by enhancing thereimbursement rates for servIcesprovided by psychiatrists, advancedpractice nurses, and critical accessproviders.

eligible individuals will continue toreceive food support, nearly half theannual appropriation for this programhad been going unspent subsequent to

changes in the federal food support law.The state appropriation was adjusted toreflect current participation levels.

Table 1bHealth and Human Services Changes-- All Funds


FY 2006-2007 FY 2008-2009Total General Fund Changes (from Table la) 115,036 166,728iHealth Care Access FundDeoartment of Human ServicesMental Health System Transformation 1,448 2,223DEFRA: Federal Deficit Reduction Act Compliance 1,039 860Exempt Certain GAMC Enrollees from MNCare (1,810) (10,629)Eliminate Dental Co-pays for Adults w/out kids <175% FPG 7,918Critical Access Dental Payments - Dedicated Expense 3,532 1,672Systems/Actuarial Costs for Critical Access Dental Payments 78Pay for Performance for Health Care Providers 329 319Administrative FFP (719) (593)Change in HCAF Investment Income (65) (418)

Health

Health Information TechnologylE-health 1,500Total Health Care Access Fund Changes 5,332 1,352Federal TANF FundDenartment of Human Services

Child Care Max. Provider Rate Adjustment, MFIP 7,247Child Care Accreditation Differential, MFIP 609Domestic Violence Information Brochure 44 88

Total Federal TANF Fund Changes 7,900 88State Government Special Revenue FundMinnesota Deoartment of Health

Assisted Living Licensing Requirements 140 280Medical Boards

D, ctic Examiners Pymt. System Conversion 10Board ofDentistry - Retain Legal Analyst 67 134Board ofMedical Practice - Contested Case Expenditures 1,00CBoard ofPhysical Therapy - Payment System Conversion 9

Ememencv Medical Services BoardHealth Professional Service Program Operating Increase 50 100

Total State Govt. Special Revenue Fund Changes 1,276 514Total Changes-All Funds * 129,544 168,682*Does not mc1ude $125,000 ofadditional federal funds or $200,000 of additional SpeCIal Revenue Fundspending.

Health Care Access FundAs summarized in Table 1b,appropriations to DHS from the HCAFwere increased by $5.3 million relative

36

to the February 2006 forecastedamounts. The increases include anappropriation of $1.5 million for severalmental health initiatives, including the

establishment of a system to collect andevaluate mental health outcomes, mentalhealth crisis infrastructure grants, anddevelopment of a system to monitormental health services. Another $3.6million is to reimburse the state MedicalAssistance (MA) program, which isfunded out of the General Fund, forincreased spending to restore paymentlevels to Critical Access Dentalproviders that were reduced as a result ofan administrative decision by thedepartment in FY 2006. The increases inthe rate payment structure sunset in FY2008.

In addition, beginning in July 1, 2007,Chapter 282 eliminates co-payments thatwere enacted in 2003 for dental servicesfor parents and adults without childrenenrolled in MinnesotaCare. The changewill increase RCAF spending for theMinnesotaCare program by an estimated$7.9 million in FY 2008-2009.

Other DRS administered budget changesfor FY 2006-2007 include $1.0 millionfor administrative costs to conform tofederal law changes, savings of $1.8million in spending related to exemptingcertain GAMC enrollees from shiftingto the MinnesotaCare program, and$329,000 for pay-for-performancefunding for health providers. See above

for discussion of related General Fundspending for each of these provisions.

Federal TANF FundFederal TANF funds will pay a portionof increased costs related to child careprograms. As discussed in the EarlyEducation section, Chapter 282 includeda variety of provisions to increase .childcare funding that effect the basic slidingfee (BSF), and the Minnesota FamilyInvestment Program (MFIP) child careprogram and Transitional Year childcare program (MFIP/TY). The changesincluded a $7.2 million TANFappropriation for FY 2007 to increasereimbursement rates for child careproviders by six percent over levels ineffect on January 1, 2006. This changeis ongoing but will be funded out ofGeneral Fund dollars in FY 2008-2009.Similarly, $609,000 of TANF funds isappropriated to establish an accreditationincentive for child care providers. Thisincentive allows for an additional 15percent increase in the reimbursementrate for accredited providers. TheGeneral Fund will provide funding forthis change in FY 2008-2009. Finally,$44,000 was appropriated for a domesticviolence information brochure for MFIPapplicants.


(16,059)(70,250)

(188,128)

(131,927)8,023,332

18,609,576


(Enacted 2005)

Table 2FY 2006-2007 Biennial Spending by Agency and Fund

Health and Human Services(dollars in thousands)

EPARTMENT OF HUMAN SERVICES

ealth and Human Services Total

gencylFund

General Fund Transfers Out

General Fund

37

Original Forecast Feb. 2006Budget Changes Forecast

enc /Fund (Enacted 2005) AmountsEndowment Fund 2Federal Fund 8,019,330 11,272

Federal TANF 454,727 (1,401)Gift Fund 150Health Care Access Fund 806,015 (118,769)Special Revenue Fund 425,152State Govt. Special Revenue Fund 1,068epartment ofHuman Services Total 17,597,849 (195,207)

EPARTMENT OF HEALTHGeneral Fund 133,806 2,328 136,13

Federal Fund 354,561 3,081 357,64Federal TANF 12,000 12,00

Gift Fund 8 8Health Care Access Fund 12,618 (66) 12,55

Medical Education Endowment Fund 173,210 265 173,47Remediation Fund 400 40Special Revenue Fund 79,893 1,194 81,0State Govt. Special Revenue Fund 73,354 73,3epartment ofHealth Total 839,928 6,802 846,73

ETERANSHOMESBOARDGeneral Fund 60,06General Fund Transfers Out (60,060Federal Fund 55Gift Fund 1,55

Special Revenue Fund 127,9eterans Homes Board Total 130,0

EALTH RELATED BOARDSSpecial Revenue Fund 204State Govt. Special Revenue Fund* 25,901ealth Related Boards Total 26,105

MERGENCY MEDICAL SERVICES BOARDGeneral Fund 6,762 196

Federal Fund 650Gift Fund


State Govt. Special Revenue FundMS Board Total 196

COUNCIL ON DISABILITYGeneral Fund 15Special Revenue Fundisability Council Total 15

MBUDSMAN FOR MH/MRGeneral Fund 5

MBUDSPERSON FOR FAMILIESGeneral Fund 490 61

38


61

ForecastChanges

814324

OriginalBudget

(Enacted 2005)

mbudsperson for Families Total

enc !Fund

UNDTOTALS

Endowment Fund 2 0


Federal Fund 8,375,097 14,353 8,389,45Federal TANF Fund 466,727 (1,401) 465,32Gift Fund 1,792 0 1,79Health Care Access Fund (118,835) 699,79Medical Education Endowment Fund 265 173,47Remediation Fund 400 0 40Special Revenue Fund 635,891 1,194 637,08State Govt. Special Revenue Fund 101,437 0 101,43

L FUNDS TOTAL 18,609,576 (188,128) 18,421,44*Does not include $1.65 million spent by the Attorney General under agreement with the Medical PracticesBoard.

General Fund Transfer Out (191,987) (16,059)General Fund 8,228,374 (67,645)

Department of HealthAppropriations to the MinnesotaDepartment of Health (MDH) wereincreased $6.6 million from all sources,including a $5.0 million onetimeappropriation in FY 2007 from theGeneral Fund for avian flu preparednessactivities. In addition, $1.5 million wasappropriated onetime in FY 2007 fromthe HCAF to develop an electronichealth record system for health careproviders. Also, $140,000 wasappropriated annually from the StateGovernment Special Revenue Fund forMDH costs related to bringing actionsfor injunctive relief and to reimburse theAttorney General for costs associatedwith changes to assisted living providerregulations.

Veterans Homes BoardGeneral Fund appropriations for theVeterans Homes Board were increased$6.2 million, including $5.1 million toimplement a new quality assurancesystem for its nursing homes.

In addition, $759,000 was appropriatedin FY 2006-2007 and $9.4 million forFY 2008-2009, to cover the agency'soperating shortfall. Finally the agencyreceived $357,000 to implementconsultant study recommendationspertaining to occupational andoperational practices.

Health-Related Regulatory BoardsAs listed in Table 1b, an additional $1.1million was appropriated from the StateGovernment Special Revenue Fund inFY 2006-2007 to the Medical PracticesBoard for legal costs related to increasesin the number of contested cases beforethe board, and another $86,000 wasappropriated to operate various healthcare-related regulatory boards.

Table 3 provides a summary of all healthand human services funding by agencyand function.

39

Table 3FY 2006-2007 Biennial Spending by Agency and Function - General Fund

Health and Human Services(dollars in thousands)


gencylFunction (Enacted 2005) Amounts

otal Health and Human Services 8,228,374 -67,645

EPARTMENT OF HUMAN SERVICESAgency Management 93,681 2,735 96,41Children and Economic Assistance Grants 832,437 3,628 836,06Health Care Grants 3,552,159 (18,335) 3,533,82Continuin Care Grants 3,198,122 (58,703) 3,139,41State Operated Services 424,029 425 424,4Federal Reimbursement (FFP) (77,096) (77,09epartment of Human Services Total 8,023,332 (70,250) 7,953,08

EPARTMENT OF HEALTHCommunity and Family Health Promotion 83,418 (123) 83,29Policy Quality and Compliance 7,330 7,33Health Protection 18,136 18,13Minority and Multicultural Health 9,964 9,96Administrative Support Services 14,958 123 15,081Other/Carryforward 2,328 2,32epartment ofHealth Total 133,806 2,328 136,13

ETERANSHOMESBOARD 60,060

MERGENCY MEDICAL SVCS. BOARD 6,762 196

COUNCIL ON DISABILITY 1,000 15

OMBUDSMAN FOR MHlMR 2,924 5

MBUDSPERSON FOR FAMILIES 490 61

For more information on thejiscalactions related to Health and HumanServices, contact David Godfrey,David. [email protected]

40

ENVIRONMENT AND AGRICULTURE

Changes enacted by the 2006 Legislatureincreased appropriations in theEnvironment and Agriculture budgetarea by $21.9 million for the 2006-2007biennium. Of that amount, $17.0 millionwas appropriated from the General Fund,including $14.9 million for the CleanWater Legacy Act, and $4.1 million wasappropriated from the Environment andNatural Resources Trust Fund.

Forecast changes accounted for anadditional $46.8 million in increasedstatutory appropriations and carryforwards across all funds, most of whichreflects increases for the PollutionControl Agency from the RemediationFund. After accounting for forecastchanges and 2006 appropriations, totalspending for the Environment andAgriculture budget area increased byabout 5.9 percent for the 2006-2007biennium, from $1.148 billion to $1.216billion.

Table 1Environment and Agriculture Changes--All Funds


FY 2006-2007 FY 2008-2009General FundDenartment of AlITiculture

Clean Water Legacy 2,400Invasive Species Staffing 248 260Second Harvest Milk program grants 200 400Containment Facilities Operations 190 380Livestock/Crop Compensation 93 106Marketing RenewablelBio-Energy 75 150Aviary Oversight Reduction (42) (42)

iBoard of Animal HealthBovine Tuberculosis Prevention 685

Board of Water & Soil ResourcesClean Water Legacy 5,840

Denartment ofNatural ResourcesClean Water Legacy 1,630Bovine Tuberculosis Prevention 274Invasive Species Prevention 550 1,100MN Shooting Sports Education Center 100 200Tower Soudan Mine Grant Cancellation (250)

Pollution Control AQ:encvClean Water Legacy 5,030

Total General Fund Changes 17,023 2,554

Environment & Natnral Resources Trust Funde "'.. , ~T~

Strategic Plan Development 300Clean Water Legacy - Riparian Land Acquisition 640Forest Legacy 500

41

trable 1 continued FY 2006-2007 FY 2008-2009Reinstatement of Vetoed Projects 2,107LCCMR Administration 550

trotal Environ. & Nat. Resources Trust Fund Chane:es 4,09"

Natural Resources FundDeoartment ofNatural Resources

Horse Trails MaintenanceIPass* 200 628Corp of Engineers/Other Campground Ops. 40CCanoe Routes Signage BCLand Appraisal Reimbursement* 90

!rotal Natural Resources Fund Chane:es 730 718Special Revenue FundDeoartment ofNatural Resources

Forest Management Services 35 7CTotal Special Revenue Fund Chau2es 35 7U

k\e:ricultural Fund[)enartment of Amiculture

Aviary Oversight Reduction 8 16!rotal Agricultural Fund Changes 8 U

[fOTAL CHANGES - ALL FUNDS 21,893 3,358* Statutory appropriation, spending amounts equal to amounts collected from fees.

Clean Water Legacy ActIn Chapter 251, the Legislature enactedthe "Clean Water Legacy Act" toprovide for the protection, restoration,and preservation of the quality ofMinnesota's surface waters. The actestablishes procedures and programs forthe identification and cleanup ofimpaired waters in the state. The actuses the framework of the federal CleanWater Act for identifying impairedwaters and developing total maximumdaily load (TMDL) plans for theimpaired waters. The act alsoestablishes a 23-member Clean WaterCouncil to work with the PollutionControl Agency and other entities inadministering the act.

The 2006 Legislature appropriated justunder $25 million for Clean WaterLegacy purposes. Of this amount, $15million is from the General Fund(including $100,000 to the Public

42

Facilities Authority) in Chapter 282,article 10; $9.31 million is appropriatedto the Public Facilities Authority frombond proceeds in Chapter 258; and$640,000 is from the Environment andNatural Resources Trust Fund in Chapter243.

Department of AgricultureIn Chapter 282, article 9, the Legislatureappropriated $806,000 from the GeneralFund to the Department of Agriculturefor invasive species staffing ($248,000);livestock and crop compensation($93,000); containment facilityoperations ($190,000); Second Harvestmilk grant ($200,000); and renewableenergy information ($75,000). InChapter 282, article 10, the Legislatureappropriated $2.4 million from theGeneral Fund to the department for theClean Water Legacy Act.

Board of Animal HealthIn Chapter 282, article 9, the Legislatureappropriated $685,000 from the GeneralFund to the Board of Animal Health forbovine tuberculosis prevention.

Department of Natural ResourcesIn Chapter 282, article 9, the Legislatureappropriated $1.5 million to theDepartment of Natural Resources. Ofthis amount, $924,000 was from theGeneral Fund for bovine tuberculosisprevention ($220,000); invasive speciescontrol ($550,000); the MinnesotaShooting Sports Education Center($100,000); and emergency deterrentmaterials assistance ($54,000). Theremaining $530,000 was from theNatural Resources Fund for canoe routedevelopment ($130,000) and federalrecreation area operation ($400,000). InChapter 282, article 10, the Legislatureappropriated just over $1.6 million fromthe General Fund to the Department forthe Clean Water Legacy Act.

Pollution Control AgencyIn Chapter 282, article 10, theLegislature appropriated just over $5million from the General Fund to thePollution Control Agency for the CleanWater Legacy Act.

Board of Water and Soil ResourcesIn Chapter 282, article 10, theLegislature appropriated just over $5.8million from the General Fund to theBoard of Water and Soil Resources forthe Clean Water Legacy Act.

Minnesota ResourcesIn Chapter 243, the Legislature enactedthe recommendations from alegislatively mandated advisory taskforce that met during the 2005-2006interim to recommend changes in thestructure and organization of theLegislative Commission on MinnesotaResources (LCMR). The law creates thenew Legislative-Citizens Commissionon Minnesota Resources (LCCMR) toreplace the LCMR. The principalchanges include the addition ofnonlegislative citizens to the commissionand clarifying the use and importance ofthe strategic plan in makingrecommendations for appropriationsfrom the Environment and NaturalResources Trust Fund. The newcommission will sunset on June 30,2016. In Chapter 243, the Legislaturealso appropriated just over $4.1 millionfrom the Environment and NaturalResources Trust Fund. This is theamount that was vetoed by the Governorin 2005.

12,262

39,742

76,734

FY 2006-07Feb-06

Forecast

2

322

(522)

11,940

40,264

76,732

FY 2006-07 ForecastEnacted Change

2005 Session

Table 2Biennial Spending by Agency and Fund - All Funds

Environment and Agriculture Budget(dollars in thousands

Federal Fund

General Fund

Agricultural Fund

Department of AgricultureAgencylFund

43

Table 2 continued FY2006-07 Forecast FY 2006-07Enacted Change Feb-06

2005 Session ForecastGift Fund 128 128

Remediation Fund 2,231 775 3,006

Special Revenue Fund 6,421 6,421

Department of Agriculture Total 137,716 577 138,293

Agricultural Utilization ResearchInstitute

General Fund 3,200 3,200

Board of Animal Health

General Fund 6,520 64 6,584

Federal Fund 2,796 644 3,440

Special Revenue Fund 92 92

Board of Animal Health Total 9,408 708 10,116

Board of Water & Soil Resources

General Fund 30,671 2,091 32,762

Federal Funds 598 30 628


Board of Water & Soil Res. Total 32,184 2,121 34,305Department of Natural Resources

General Fund 212,660 6,301 218,961

Endowment & Perm. School Fund 438 438

Federal Fund 37,611 3,055 40,666

Game and Fish Fund 182,327 (2,011) 180,316

Gift Fund 2,925 2,925

Natural Resources Fund 134,052 5,212 139,264

Remediation Fund 3,369 1,034 4,403


Department ofNatural Res. Total 611,850 13,591 625,441

Met Council Parks

General Fund 6,600

Natural Resources Fund 9,140

Met Council Parks Total 15,740

Zoological Board


Gift Fund 2,114 2,114

Natural Resources Fund 270 270


Zoological Board Total 34,047 34,047

44

Table 2 continued FY 2006-07 Forecast FY 2006-07Enacted Change Feb-06

2005 Session ForecastMinnesota Resources (LCCMR)

Environ. & Nat. Res. Trust Fund* 33,560

Minnesota Resources Fund 1,007

Natural Resources Fund 1,600

Minnesota Resources Total 35,160 1,007

Pollution Control Agency

General Fund 22,717 139 22,856

Environmental Fund 117,152 (364) 116,788

Federal Fund 43,632 382 44,014

Gift Fund 22 22



State Govt. Special Revenue Fund 98 98

Pollution CO)1trol Agency Total 265,061 28,789 293,850

Science Museum of Minnesota

General Fund 1,500

Minnesota Conservation Corps

General Fund 700

Natural Resources Fund 980

MN Conservation Corps Total 1,680

Total By Fund


Agricultural Fund 40,264 (522)

Endowment & Perm. School Fund 438

Environmental Fund 117,152 (364) 116,788

Environ. & Nat. Res. Trust Fund 33,560 33,560

Federal Fund 96,577 4,433 101,010

Game and Fish Fund 182,327 (2,011) 180,316

Gift Fund 5,189 5,189

Minnesota Resources Fund 1,007 1,007

Natural Resources Fund 146,042 5,212 151,254




Total Environment & Agriculture: 1,147,546 46,793

*Amounts for the LCCMR reflect actual appropriations from the Environment and Natural Resources TrustFund rather than spending amounts reported by the Department of Finance.

45

Table 3Biennial Spending by Function - All Funds

Environment and Agriculture Budget(dollars in thousands)

FY 2006-07 ForecastEnacted Change

2005 SessionAgency/Function

Department of Agriculture

Protection Service

Agricultural Marketing andDevelopment

Administration and FinancialAssistance

Ethanol Producer Payments

Special Revenue Fund Open/StatutoryAppropriations

Gift Fund

Remediation Fund Open/StatutoryAppropriations

Agricultural Fund Open/StatutoryAppropriations

Federal Funds

Department of Agriculture Total

Agricnltural Utilization ResearchI iBoard of Animal Health

Special Revenue Fund Open/StatutoryAppropriations

Federal Funds

Board of Animal Health Total

Board of Water & Soil ResourcesSpecial Revenue Fund Open/StatutoryAppropriations

Federal Funds

Board of Water & Soil Res. Total

Department of Natural Resources

Operations Support

Water Resources Management

Land & Mineral ResourcesManagement

21,331

7,950

14,214

34,013

6,421

128

1,455

40,264

11,940

137,716

3,200

6,520

92

2,796

9,408

30,671

915

598

32,184

18,636

22,184

17,578

46

2

775

(522)

322

577

64

644

708

2,091

30

2,121

FY 2006-07Feb-06

Forecast

21,331

7,950

14,216

34,013

6,421

128,

2,230

39,742

12,262

138,293

3,200

6,584

92

3,440

10,116

32,762

915

628

34,305

21,015

22,184

17,578

Table 3 continued FY 2006-07 Forecast FY 2006-07Enacted Change Feb-06

2005 Session Forecast

Forest Management 70,652 70,652

Fish and Wildlife Management 125,554 125,554

Ecological Services 20,431 20,431

Parks and Recreation Management 66,162 66,162Enforcement 57,309 57,309

Trails and Waterways 53,631 53,631

Leech Lake and White Earth 5,157 5,157Reservation1854 Indian Treaty Settlement 10,655 37

Public Hunting Grounds/Con Con 278Areas

Payment in Lieu ofTaxes 29,750 3,133 3

DNR Firefighting 16,708 752

General Fund Carryforward 2,379

Game and Fish Fund Open/Statutory 7,626 (2,011)Appropriations

Natural Resources Fund 7,328 5,212Open/Statutory Appropriations

Special Revenue Fund Open/Statutory 38,468Appropriations

Gift Fund 2,925

Remediation Fund Open/Statutory 3,169 1,034Appropriations

Endowment & Permanent School Fund 38

Federal Funds 37,611 3,055 40,666

Dept. ofNatural Resources Total 611,850 13,591 625,441

Met Council Parks 15,740 15,740

Zoological Board 13,148 13,148

Special Revenue Fund Open/Statutory 18,785AppropriationsGift Fund 2,114

Zoological Board Total 34,047

Minnesota Conservation Corps 1,680

Minnesota Resources*

LCCMR Administration 619

Minnesota Resources Fund 1,007(Carryforward)

Recreation 12,519

Water Resources 5,132

47

Table 3 continued

Agricultural & Natural Res.-BasedIndustriesLand Use & Natural ResourcesInfonnation

Environmental Education

Children's Environmental Health

Fish & Wildlife Habitat

Energy

Minnesota Resources Total

Pollution Control Agency

Protection of the Water

Protection of the Air

Protection of the Land

Administrative Support

Multimedia

Office of Environmental AssistanceSpecial Revenue Fund Open/StatutoryAppropriations

State Govt. Special Rev. Open/Stat.Appropriations

Environmental Fund Open/StatutoryAppropriations

Gift Fund

Public Facilities Authority

Remediation Fund Open/StatutoryAppropriationsFederal Funds

Pollution Control Agency Total

Science Museum of Minnesota

Total Environment & Agriculture:

FY2006-07Enacted

2005 Session

2,683

1,750

495

200

9,576

2,186

35,160

50,867

18,901

36,938

3,166

8,610

39,50824,684

2

4,783

22

33,948

43,632

265,061

1,500

1,147,546

ForecastChange

42

5

92

(364)

28,632

382

28,789

46,793

FY 2006-07Feb-06

Forecast

2,683

1,750

495

200

9,576

2,186

35,160

50,909

18,901

36,938

3,171

8,702

39,50824,684

2

4,419

22

62,580

44,014

293,850

1,500

1,194,339

*Amounts for the LCCMR reflect actual appropriations from the Environment and Natural Resources TrustFund rather than spending amounts reported by the Department of Finance.

For more information on the fiscalactions related to the Environment andAgriculture, contact Daniel Mueller,Daniel.Mueller@~enate.mn or GregKnopfJ,[email protected]

48

ECONOMIC DEVELOPMENT

Article 11 of Chapter 282 appropriated$34.0 million in additional funding forthe FY 2006-2007 from all funds foreconomic development programs. Thisis added to the previous all-fundsappropriations of $2.5 billion for thebiennium.

Of the $34.0 million, $29.6 was from theGeneral Fund, and is added to thepreviously enacted budget of $306million.

Table 1Economic Development Spending Changes--All Funds


IFY 2006-200 IFY 2008-200CJ

General Fund

!Reestablish MN BoxinQ Commission 5C

rnent. of Emolovment and Economic Develooment

BiotechlMedical Genomics Partnership l5,00C

Transfer to 21st Century Minerals Fund 1l,50C

Biobusiness Alliance of Minnesota 46

Cedar Mills Wastewater Treatment Center lOt

Advocating Change Program l5( 300

Worthington Veterans Memorial 1(

Youth Build Program 15C 150

Summit Academy Hard Hats Program 200

Meadowbrook Housing Collaborative 25

Public Facilities Authority Clean Water 100

re MN Tourism

Minnesota Film and TV Board 1,700

Historical Societv

MN Ag Interpretive Center 200

Total General Fund Changes 29,652 450


MN BoxinQ Commission 69

Deot. of Emolovment and Economic Develooment

SBIR-Small Business Access to Federal Grants 10 40

rnenmunemofComme~e

Telephone Access Charge for DeaflHard ofHearing Funding* 200 400

Total Special Revenue Fund Changes 210 509

l\Vorkforce Development Fund

Northern Connections Pilot-West Central 250

Permanent Funding for MN Employment Ctr. for Deaf and Hard of Hearin~ 300

Summer Youth Employment program 2,50C 2,500

Licensure ofForeign Trained Health Care Workers 450

49

lTable 1 continued [Fy 2006-20cr [Fy 2008-2009

lTotal Workforce Development Fund Changes 3,200 2,800

lPetroleum Tank Release Cleanup Fund

\MNDOT Reimbursement for Cleanup Costs 955

* Open appropnatlOn; spendmg amounts equal to amounts collected from fees.

BiotechnologylMedical GenomicsFunding for the expenses of thecollaborative research partnershipbetween the University of Minnesotaand the Mayo Foundation in Rochesterfor research in biotechnology andmedical genomics was increased by $15million to $30 million for the biennium,all of which are onetime funds availableuntil expended. An annual report on theuse of the appropriations must besubmitted to the Governor and relevantlegislative committees by June 30 ofeach fiscal year until the funds areexpended.

Infrastructure for New Steel Mill$11.5 million is for transfer to theMinnesota Minerals 21 st Century Fundfor a grant to Itasca County forinfrastructure projects such as roads, raillines, natural gas pipelines, water, andwastewater treatment systems for a newsteel mill in the county. Of the amountgranted, $500,000 is to be used for othermineral-related projects in the Taconicrelief area.

Film Production Jobs ProgramThe Minnesota Film and TVBoard received $1.7 million to reimburseup to 15 percent of film production costsincurred in the making of featurefilms, national television programs,documentaries, music videos, andcommercials that directly create newfilm jobs in Minnesota. The scope andtitle of the board was expanded toinclude television production.

50

Boxing CommissionThe 2006 Legislature reestablished theMinnesota Boxing Commission andappropriated $50,000 to operate andadminister the commission through FY2007. By December 15, 2006, thecommission is to report to the Governorand Legislature setting forth a feeschedule that would make thecommission self-sufficient beyond FY2007. The duties and responsibilitiesestablished for the Board of Boxing aresimilar to those that were abolished inthe 2002 session. The board hadreceived its last appropriation in fiscalyear 2000.

OTHER CHANGES

In nongeneral fund spending, theLegislature provided $2.5 million fromthe Workforce Development Fund forsummer youth employment inMinneapolis; a pilot workforce project inFergus Falls of $250,000; and $450,000for a pilot project to encourage licensurein Minnesota of foreign-trained healthcare professionals.

Also from nongeneral funds, theLegislature provided $955,000 to theDepartment of Transportation for costsreimbursable under the Petroleum TankRelease Cleanup Fund and $200,000from the Telecommunications AccessFund to establish a budget base for theCommission Serving Deaf and Hard-ofHearing People.


Economic Development Budget(dollars in thousands)


gencylFund (Enacted 2005) Amounts

EPARTMENT OF EMPLOYMENT AND ECONOMIC DEVELOPMENT

18

1,67

1,6030,61

47,22

41,351

221,3

343,98

300

689

689

1,059

7,235

4,948

31,668

30,817

(1,910

1,398

o

1,670

5,015

700

183

18,402

23,417

22,092

70,470

32,52

47,228

40,292

189,67

312,269

(70,470)

CHITECTURE, ENGINEERING, AND SURVEYORS BOARD

INNESOTA TECHNOLOGY INC.OUSING FINANCE AGENCY

LECTRICTY BOARD

CCOUNTANCY BOARD

EPARTMENT OF COMMERCE

ARBERS, COSMETOLOGY BOARD


XPLORE MINNESOTA TOURISM

General Fund

Workers' Compensation Special Fund

State Government Special Revenue FundPetroleum Tank Release FundEnvironment & Natural Resources Fund

General Fund transfer out

General Fund 1,57 262

General Fund

General Fund 974 148

Special Revenue FundFederal Fund

Special Revenue Fund 43,301

Special RevenueGeneral Fund


General Fund

Gift Fund 1,262Remediation Fund 1,40Federal TANF Fund 0

Petroleum Tank Release Fund 12,40

Federal Fund 478,707Workforce Development Fund 87,214

Subtotal, Department of Commerce

Subtotal, Employment & Economic 715,065evelopment

Subtotal, Housing Finance Agency

Subtotal, Explore Minnesota Tourism

51


enc /Fund (Enacted 2005) AmountsUBLIC UTILITIES COMMISSIONGeneral Fund 8,326 182Special Revenue 6,248

Subtotal, Public Utilities Commission 14,574 182EPARTMENT OF LABOR & INDUSTRYGeneral Fund 5,744 488Special Revenue Fund 2,580Workforce Development Fund 1,500Federal Fund 10,676

Workers' Compensation Special Fund 201,938 4,570Subtotal, Department of Labor & Industry 222,438 5,058

EDIATION SERVICES DEPARTMENTGeneral Fund 3,546 2

evenue Fund 6ediation Services 3,552 2

ORKER COMP COURT OFPEALS

Workers' Compensation Special Fund 3,23ISTORICAL SOCIETY

General Fund 46,450Special Revenue Fund 1,862

Subtotal, Historical Society 48,312

TSBOARDGeneral Fund 17,186 3Special Revenue Fund 2Gift Fund 129Federal Fund 1,312

Subtotal, Arts Board 18,629 3ON RANGE RESOURCES & REHABILITATION (IRRR)

IRRRFund 52,204 27,142Economic Protection Trust Fund 2,162 25

Subtotal, IRRR 54,366 27,398GION 3-0CCUPATION TAX

General Fund 936General Fund transfer out (936

Subtotal, Region 3-0ccupation Tax 0UNDTOTALSGeneral Fund 306,075 5,420 311,49

General Fund transfer out (71,406) (71,406

Economic Protection Trust Fund 2,162 256 2,41

Environment & Natural Resources Fund 700 1,60

Federal Fund 680,371 31,668 711,985

Federal TANF Fund 0 153

Gift Fund 1,391 1,391

IRRRFund 52,204 27,142 79,34

52

enc !FundPetroleum Tank Release FundRemediation Fund


State Government Special Revenue FundWorkers' Compensation Special Fund

Workforce Development Fund

L Funds Total

OriginalBudget

Enacted 2005)44,920

1,400

128,334

183206,844

88,714

1,441,89

ForecastChanges

(1,910)

4,570

4,948

72,247


43,011,40

128,33

18

Table 3Biennial Spending for Function - All Funds

Economic Development Budget(dollars in thousands)

FY 2006-07 Change Enacted Total BudgetFunction Base FY 2006-07 FY 2006-07Promotion of Business and EmploymentSecurity 228,917 33,657 262,574Licensing of Business Professionals -0- 50 50Educating and Preserving Arts and History 46,450 200 46,650Totals 275,367 33,907 309,274

For more information on thefiscalactions related to EconomicDevelopment, contact David Jensen,[email protected]

53

PUBLIC SAFETY AND JUDICIARY

Most Public Safety and Judiciarysupplemental appropriations for FY2006-2007 are contained in Chapter 282,article 13. In addition, certain provisionscontained in Chapter 260, the PublicSafety Policy Bill, and Chapter 238, the2006 Claims Bill, also have implicationsfor General Fund spending. TotalGeneral Fund spending increases were

$3.9 million in FY 2006 and $15.8million in FY 2007, while nontaxrevenues will also decline by $200,000annually beginning in FY 2007 due tolower transfers from the Peace OfficerStandards and Training (POST) Fund. ASpecial Revenue Fund increase of$200,000 in FY 2007 was also made.

Table 1Public Safety Spending Changes--All Funds


FY 2006-2007 FY 2008-2009~neralFund

Suoreme CourtChemical Dependency Initiative 600

Board of Judicial StandardsHearing Costs 172

Deoartment ofPublic SafetyHomeland Security-federal match 284Supplemental Minneapolis Police funding 1,533Internet Child Pornography Team (BCA) 1,000 1,556Post Noncompliant Sex Offenders (BCA) 200 232Missing and Unidentified Persons (BCA) 100Office of Justice Programs (various initiatives) 1,618 2,030Financial Crimes Task Force 354Fire Marshal Funding Reforms (5,664)

lDeoartment of CorrectionsSalary Supplement 13,313 16,250Mentoring Children of Inmates program 250Include Scott County in CCA Formula 196 392Discharge Planner for Mentally III 400Medical Claims (Ch. 238) 64Sentencing Guidelines Est. Bed Increase (Ch. 260) 4,838

Total General Funds Changes 19,684 20,034

Special Revenue FundiPOSTBoard

Reduced Training Reim. Transfer to GF (200 (400)

lDeoartment ofPublic SafetvFire Marshal Funding Reforms-Trn to GF 2,736Fire Marshal Funding Reforms-Base App. 5,664Fire Marshal Funding Reforms-Revenues (19,000

Total Special Revenue Fund Changes (200 (11,000)* There were no changes to other funds.

54

amounts appropriated to the OfficeJustice Programs:

Board of Judicial StandardsA supplementary appropriation of$172,000 was made to the board for ajudicial hearing cost deficiency request.

Supreme CourtThe Legislature appropriated $600,000to the Supreme Court for Judicial BranchChemical Dependency Initiatives.

POST BoardChapter 282 appropriated $200,000 fromthe Special Revenue Fund to the POSTboard for law enforcement trainingreimbursements; a correspondingreduction of $200,000 in General Fundnontax revenues occurs because fundswill no longer be transferred to theGeneral Fund to pay for trainingreimbursement.

$800,000 IS for the Gang StrikeForce;$98,000 is for a Ramsey County SafeHarbor pilot program;$75,000 IS for the HumanTrafficking Task Force;$60,000 is for the legal advocacy fortrafficking victims;$35,000 is for a Human TraffickingHotline;$200,000 is for the YouthIntervention Program;$150,000 is for the Crime VictimIntervention Program;$200,000 is to expand collaborativesecurity systems in downtownMinneapolis;$1.5 million IS for increasedMinneapolis police funding; and$354,000 is for the Financial CrimesTask Force.

•

•

•

•

•

•

•

•

•

•

In addition, Chapter 238, the 2006Claims Bill, appropriated $64,000 tofund 15 claims against the state forinjuries suffered while performingcommunity service of sentence-toservice work for correctional purposes.

Department of CorrectionsThe Legislature increased funding forthe Department of Corrections by $13.8million for the 2006-2007 biennium. Ofthis amount, $11.5 million wasappropriated to correctional institutionswith the intent of providingsupplemental funding for staff salariesand benefits. The remaining $2.3million was appropriated to theCommunity Services Division to be usedas follows: $1.9 million for supplementalstaff salaries and benefits; $250,000 fora grant to provide one-on-one mentoringto the children of incarcerated parents;and $196,000 for an increase in theCommunity Corrections Act (CCA)subsidy to fund the inclusion of ScottCounty into the community correctionssystem and aid formula.

Department of Public SafetyChapter 282 increased appropriations tothe Department of Public Safety by $5.1million for FY 2006-2007, including:$284,000 for Homeland Security andEmergency Management to fund thestate match for Federal EmergencyManagement Agency (FEMA) disastergrants; $1.3 million for the Bureau ofCriminal Apprehension (BCA) for astatewide Internet Child PornographyTeam ($1.0 million); to upgrade thenoncompliant predatory offender database ($200,000); to address the missingpersons and unidentified bodies databasebacklog ($100,000); and $3.5 million forthe Office of Justice Programs. Of the

55


Public Safety Budget(dollars in thousands)


(Enacted Amounts2005)

Supreme CourtGeneral Fund 84,807 84,807Federal Fund 6,961 6,961Gift Fund 92 92Special Revenue Fund 2,448 2,448

Supreme Court Total 94,308 94,308Court of Appeals

General Fund 16,378 16,378Legal Professional Boards


District Courts

General Fund 462,226 1,559 463,785Federal Fund 410 410Special Revenue Fund 202 202

District Court Total 462,838 1,559 464,397Tax Court

General Fund 1,452 3 1,455Uniform Laws Commission

General Fund 96 96Board of Judicial Standards

General Fund 554 554Public Defense Board

General Fund 122,504 15 122,519Department of Public Safety

General Fund 162,913 2,596 165,509Federal Fund 138,372 138,372Special Revenue Fund 21,660 21,660

State Government Special 89,129 89,129Revenue

Dept. of Public Safety Total 412,074 2,596 414,670

POST BoardSpecial Revenue Fund 9,763 9,763

Private Detective Board

General Fund 252 27 279

Human RightsGeneral Fund 6,980

56

Table 2 continued Original Forecast Feb. 2006Budget Changes Forecast

(Enacted Amounts2005


Human Rights Total 7,284 (7,284)

Department of CorrectionsGeneral Fund 825,938 1,137 827,075

Federal Fund 9,557 9,557

Gift Fund 38 38


Dept. of Corrections Total 869,505 1,137 870,642

Sentencing GuidelinesGeneral Fund 926 46 972

Board of VeterinaryMedicine

General Fund 7 7

Fund TotalsGeneral Fund 1,685,033 5,383 1,690,416

Federal Fund 155,300 155,300

Gift Fund 130 130


State Govt. Special Revenue 89,129 89,129FundTotal All Funds 2,008,057 5,383 2,013,440

For more information on the fiscalactions related to Public Safety andJudiciary, contact Chris Turner,Chris. [email protected]

57

TRANSPORTATION

The supplemental budget appropriations fortransportation adopted by the 2006Legislature are contained in Article 12 ofChapter 282. Additionally, the Senate andthe House of Representatives each passed anOmnibus Transportation Bill (Senate FileNo. 3764 and House File No. 3761) toprovide additional funding for transportationpurposes. However, the subsequentconference committee was not able to agreeon a final transportation funding and policypackage.

Table 1 shows total transportation-relatedspending changes enacted in 2006. Inaddition, the proposed constitutionalamendment to dedicate motor vehicle salestax revenues to roads and transit could, ifadopted, alter spending beginning in FY2008.

Table 1Transportation Changes--General Fund*


FY 2006-2007 FY 2008-2009Denartment ofTransnortation

Grant to Roseau County for Radio 380TowerDenartment ofPublic Safety

Defibrillators for State Patrol Vehicles 312Total Change Items 692*There were no changes to nongeneral funds for transportatIon.

The 2006 Legislature appropriated anadditional $692,000 for transportationpurposes from the General Fund, assummarized in Table 2. Of this amount, theDepartment of Transportation received aonetime appropriation of $380,000 to designand construct a new radio tower in RoseauCounty. The Department of Public Safetyreceived a onetime appropriation of$312,000 for the purchase of automatedexternal defibrillators for State Patrolvehicles in greater Minnesota. Each threedollars of this appropriation must bematched by two dollars from nonstatesources.

58

Capital BudgetIn addition, the Capital Investment Bill(Chapter 282) adopted by the 2006Legislature authorized general obligationbonds amounting to $143 million for theDepartment of Transportation and $16.6million for the Metropolitan Counciltransportation-related programs. (See theState Debt and Capital Expendituressection.)

Other Transportation Policy ChangesThe 2006 Legislature also passed severalindividual transportation-related policy bills.

These included permitting low-speedelectric vehicles on residential roadways(Chapter 189); authorizing the use ofcommunications headsets by firefighters(Chapter 208); requiring at least 30 minutesof driver education on organ/tissue donation

(Chapter 192); and requmng theMetropolitan Council to maintain acontinuous service area of the MetroMobility special transportation servicewithin the boundaries of the transit taxingdistrict (Chapter 279).

9

1,24

71,129

16,95

11,02

15,60

39,039,92

38,461

147,391113,82

360,49

242,7

543,27919,86

2,264,40


531

550

(708)

19

(708)6,763

17,056

10,824

10,293

(12,686

(12,686)(12,686)

(51,214)(251,215)(296,355)

98

16,311

16,311

38,442

1,24

919,866

39,021

16,956

98

597,342

39,924

18,198

90

10,489

90

60,831

246,821

349,675

113,820147,391

205,187

403,077246,821156,256

251,215

242,74

536,511919,866

4,400,899

**2,315,622

Original Feb. 06Budget Forecast

(Enacted 2005) Chan es

Table 2Biennial Spending by Agency and Fund - All Funds

Transportation and Public Safety(dollars in thousands)

enc /Fund

General FundMetro Area Transit Fund

e artment of Public SafeGeneral FundEnvironmental FundFederal Funds

Metro Area Transit Fund

Gift Fund

Highway User Tax Distribution Fund

Gift FundHighway User Tax Distribution FundSpecial Revenue Fund

etro olitan Council Transit

Trunk Highway Fund

Federal Fund

und TotalsGeneral Fund

Environmental Fund

Greater MN Transit Fund

County State-Aid Highway Fund

e artment of Trans ortation

State Airports Fund*

Highway User Tax Distribution Fund

Trunk Highway Fund


Trunk Highway Bond Fund***

Federal Fund

Municipal State-Aid Street Fund

Greater MN Transit Fund

County State-Aid Hi hwa FundGeneral Fund

Subtotal: Dept. ofPublic Safety

Subtotal: Metro olitan Council

Subtotal: De t. of Transportation

59

39,9152,8242,74

2,411,7


Feb. 06ForecastChan es

OriginalBudget

enc /Fund (Enacted 2005)


otal-All Funds 5,153,651 (298,217) 4,855,43*There was no legislative action on the State Airport Fund in 2006. The February 2006 Forecast assumed a GeneralFund transfer that was not enacted.**Includes transfer of$99,014 to Debt Service Fund.***As of the November 2005 Forecast, reporting on Trunk Highway Bonds is included in the Transportation CapitalProjects Fund (290), and is no longer included in Budgetary Fund Statements.

State Airports Fund* 39,924

Trunk Highway Bond Fund*** 251,215 (251,215

Municipal State-Aid Street Fund 242,745

Trunk Highway Fund 2,463,013 (51,214)

Omnibus Transportation BillThe Senate Omnibus Transportation Billpassed the Senate (46-18) on May 11,2006.As mentioned previously, this bill was notsubsequently enacted by the Legislature.

The bill included no new taxes or revenuesfor transportation purposes. However, itauthorized $35.3 million in trunk highwaybonding projects, including $18.2 millionfor construction of the Mankato DistrictTransportation Headquarters Building, $10.1million for refurbishing the exterior of theDepartment of Transportation Building inSt. Paul, and $6 million for completion ofTrunk Highway 610 construction.

The bill also included a statutorydetermination of the distribution of proceedsof the Motor Vehicle Sales Tax (MVST),contingent upon the adoption of the MVSTconstitutional amendment at the 2006general election. Over a five-year period,the proposed distribution would graduallyincrease the percentages of MVST depositedin the Highway User Tax Distribution Fund(HUTDF) and in a new Transit Fund, anddecrease the percentage of MVST depositedin the General Fund, so that as of July 1,2011, the HUTDF would receive 60 percentof MVST revenues and the Transit Fundwould receive 40 percent.

The bill also suggested a change to the ballotquestion language for the amendment.

As passed by the Senate, the bill containednumerous transportation policy changes,most without any significant fiscal impact.

These included: adjustments to thresholdrequirements for towns' eligibility forassistance from the town bridge account;creation of a "Gold Star Family" licenseplate program for motor vehicles; creation ofa special motorcycle plate for combatwounded veterans; changes in proceduresfor owner's retrieval of contents from atowed motor vehicle; changes to childpassenger restraint requirements; an increasein allowable vehicle weights on highways;imposition of an additional surcharge formoving violations committed while using amobile phone; requiring MnDOT to conductvarious transportation studies; and imposingadditional restrictions on provisionaldriver's license holders.

MVST Constitutional AmendmentThe 2006 general election ballot will containthe following question, as passed by the2005 Legislature:

60

..Shall the Minnesota Constitution beamended to dedicate revenue from a tax onthe sale ofnew and used motor vehicles overa five-year period, so that after June 30,2011, all of the revenue is dedicated at least40 percent for public transit assistance andnot more than 60 percent for highwaypurposes?"

The 2006 Omnibus Transportation Billspassed by the Senate and the House ofRepresentatives both amended the languageof this question. However, no conferencecommittee report was adopted and approved,so the existing ballot question wasunchanged.

If the amendment is adopted, Article XIV ofthe Minnesota Constitution will contain twoadditional sections, which will require thatstarting July 1,2007,63.75 percent of

MVST revenues must be apportioned fortransportation purposes. This amount shallincrease by ten percent each year, so thatafter June 30, 2011, 100 percent of MVSTrevenues are dedicated to transportation.The MVST revenue shall be allocated notmore than 60 percent to the HUTDF and atleast 40 percent to public transit. The exactMVST revenue allocation betweenhighways and public transit must still bedetermined by the Legislature.

Table 3 shows the resulting revenue gains totransportation and losses to the GeneralFund, assuming that the Legislaturemaintains the 60/40 highways/transit split.

Table 3Estimated Revenue Changes for Proposed

MVST Constitutional Amendment(dollars in millions)

FY2008 FY2009 FY 2010 FY2011 FY 2012

KJeneral Fund -$55.8 -$116.2 -$167.3 -$241.8 -$285.2

Highways (HUTDF) $34.9 $71.2 $101.8 $146.6 $172.7

Transit $20.9 $45.0 $65.5 $95.2 $112.5

For more information on thejiscal actionsrelated to Transportation, contact Krista Boyd,[email protected]

61

STATE GOVERNMENT FINANCE

State Government supplemental budgetappropriations and changes werecontained in Articles 14 and 15 of Laws2006, Chapter 282, and in Chapters 271and 277, the Omnibus Pension Bills. Assummarized in Table 1, General Fundappropriations were increased by $5.8million with few changes to other funds.The majority of new dollars were forveterans programs.

Table 2, displayed at the end of thissection, summarizes FY 2006-2007changes since the end of the 2005session. Most General Fund increases instate agency appropriations reported inForecasts reflect the carryforward ofunspent operating funds from FY 20042005.

Table 1State Government Changes--All Funds


FY 2006-2007 FY 2008-2009General Fund

ceBankruptcy Counsel-NWA Bankruptcy 325Retirement Systems (Ch. 277) (2,016) (4,032)

Denartment ofVeterans AffairsState Soldiers Assistance Program grants 2,000 4,000Service Enhancement Grants for CVSO's 200 400Veterans Assistance Offices 600 1,200Veterans Outreach funding deficit 500 500Veterans Service Organizations deficits 80One-stop Website & Internet Support 100 200

bffice ofEntemrise TechnologvIT Security Enhancements 1,900 3,800

Denartment ofEmplovee RelationsCenter for Health Care Purchasing Improve. 100 200

Amateur Snorts CommissionRestore One-time Cut 60egislative Coordinating CommissionLegislative Forum (Vetoed) [30]*MN, ND, SD, Manitoba Legislative Forum (Vetoed) [7]*ndirect CostsState Board ofInvestments Funding Restructuring 1,950

~[rotal General Funds Changes 5,79(jSpecial Revenue FundState Board ofInvestmentFunding Source Restructuring** 1,950 3,900Norkers' Compensation Fund)ffice of A

.. aringsRelocation to Stassen Building 320 (297)

..* PrOVISIon vetoed by Governor, not mc1uded m total.**Open appropriation; spending amount equal to dedicated revenues.

62

LEGISLATURE

The Legislature appropriated $37,000to the Legislative CoordinatingCommission (LCC) for two forums.$30,000 in onetime funding was for alegislative effectiveness forum and$7,000 was to pay the dues to theInternational Legislators Forum. Thelatter forum would allow Minnesotalegislators to meet with counterparts inNorth and South Dakota and Manitoba,Canada to discuss issues of mutualconcern. The Governor vetoed these twoappropriations. His veto message statedthat these items could be funded withinthe Legislature's existing budget. TheLCC was appropriated $250,000 tocomplete a study on ending poverty (seeEarly Childhood Education section).

GOVERNOR-ELECT EXPENSES

Minnesota Statutes, section 4.51, wasamended to require the Commissioner ofAdministration to request a transfer offunds from the General Fund contingentaccount for payment of office space andstaff salaries of the new Governor-elect.The transfer would be equal to 1.5percent of the amount appropriated inthe current fiscal year for the existingGovernor, subject to LegislativeAdvisory Commission (LAC) approval.For FY 2007, the first time this provisionmight be applicable, this transfer wouldamount to $54,000.

STATE AGENCIES

Office of Enterprise Technology(OET)An ongoing annual appropriation of$1.9 million was made toOET for comprehensive planning,implementation, and administration of

63

enterprise information technologysecurity. This appropriation was partlyin response to a December 2005Legislative Auditor's audit report onmainframe security.

Chapter 282 also established aninformation and telecommunicationstechnology systems and services accountin the Special Revenue Fund. Theauthorizing language allows OET, uponadvance agreement with participatingstate agencies or other governmentalentities, to collect a charge for purchasesof information and telecommunicationsservices through state contracts. Thefunds in the account are statutorilyappropriated to OET to be used forpersonnel and technology activities thatcreate government efficiencies. TheOET was unable to provide theLegislature with a projection of expectedcollections for FY 2007 during thelegislative session.

Office of Administrative Hearings(OAH)A onetime appropriation of $320,000was made from the Workers'Compensation Fund for costs ofrelocating OAH from leased space inMinneapolis to space in the StassenBuilding in St. Paul.

The amount of space that theDepartment of Revenue needs for apaper filing area on the second floor ofthe Stassen Building has significantlybeen reduced since the conversion to anelectronic format for tax filing, therebymaking the space available for use byother state agencies. In order to makethe necessary renovations, theDepartment of Administration plans touse dollars available in a facility repairand replacement account in the Special

on operations, activities, and impacts ofthe center.

Department of Veterans AffairsThe Legislature approved a total of $3.5million in additional appropriations forthe Department of Veterans Affairs fornew and expanded veterans programs.The package includes:

State Soldier's Assistance Program(SSAP) Grant. A $2 million increase toSSAP brings total biennial funding to$3.4 million. The additional funding willallow for enhanced services, such asfamily therapy or temporary financialassistance for veterans experiencingdifficulties obtaining their VA benefits.

Minnesota Amateur SportsCommission (MASC)A $60,000, onetime appropriation wasmade to MASC, to partially restore a cutto the agency's base made in the 2005session. It is expected that thecommission will be able to cover itsoperating budget needs in the futurethrough lease payments made by aprivate developer of land at the NationalSports Center.

and Assistance Funding$250,000 each year was

OutreachDeficit.

The land provision approved by the 2005Legislature was also modified byChapter 282. The change allows MASCto offer two 30-year renewals on a 30year lease at the National Sports Center,for a total lease period of 90 years. TheCommission is in negotiations with aprivate developer to allow theconstruction of a Sports Mall complexon the state-owned land in Blaine. Thedevelopment plans include the potentialfor a hotel and waterpark.

Department of Finance$325,000 in onetime funds wasappropriated to cover the costs of aspecial attorney to represent the state'sinterests in the Northwest AirlinesChapter 11 bankruptcy proceedings.The state has $36.9 million of generalobligation bonds outstanding that wereissued to build the Duluth MaintenanceFacility. Of this total, $21 million isscheduled to be paid through NorthwestAirlines lease payments.

Department of Employee Relations(DOER)The Department of Employee Relationsreceived a $100,000 ongoingappropriation to establish and administerthe Center for Health Care PurchasingImprovement as an administrative unitwithin the department. The purpose ofthe center is to support state efforts to bea more prudent and efficient purchaserof health care services by developingstrategies for purchasing andperformance measurement. TheCommissioner of DOER is to annuallyreport to the Legislature and Governor

This renovation project is anticipated tobe completed by January 1, 2008, andwill result in lease savings starting in FY2009. The workers' compensation baseappropriation for OAH has been reducedby $297,000 to reflect the savings.

Revenue Fund. The Department ofAdministration intends to accomplish therenovation for less than the original $3.6million contained in its capital budgetrequest for the same purpose. The use ofdollars from the repair and replacementaccount will result in the delay of otherasset preservation projects in stateowned buildings.

64

provided to help fund a deficit in theoutreach and assistance efforts of thedepartment. These programs wereoriginally funded in the 2005 sessionthrough revenues from the sales of"Support Our Troops" license plates.However, revenues from the plates arebelow projections and this General Fundappropriation is intended to ensure thatthe department will meet itscommitments for outreach to veterans.

Veterans Service Organizations Deficit.$80,000 in onetime funding wasprovided to fund a projected deficit forthe small Veterans ServiceOrganizations, which are partiallydependent on funds from the "SupportOur Troops" plates.

Service Enhancement Grants for CountyVeteran Services Offices (CVSOs).Funding for CVSO grants was increasedby $200,000 annually, bringing totalannual funding to $295,000 per year.The new funds will be used for grants toenhance benefits and services toveterans, giving priority to outreach,reintegration of combat veterans intosociety, and reducing homelessnessamong veterans. The Vinland Centerand Minnesota Assistance Council forVeterans (MAC-V) are eligible to applyfor grants in FY 2007.

Veterans Assistance Offices on Campus.$600,000 was provided to establish"Veterans Assistance Offices" at state-funded four-year colleges anduniversities, coordinated by theMinnesota Department of VeteransAffairs. These offices would serve asreferral points for all state and federalveterans benefits, as well as communityand university services. Further,language contained in Chapter 197

65

creates a higher education veteransassistance program steering committeethat is chaired by the Commissioner ofVeterans Affairs and includesmembership from the Department ofMilitary Affairs, Minnesota StateColleges and Universities, University ofMinnesota, private colleges anduniversities, Office of Higher Education,county veterans service offices, and theDepartment of Employment andEconomic Development. The steeringcommittee is to advise on the allocationof appropriations and develop a longrange plan to serve students who areveterans. The committee is also requiredto report to the Legislature onimplementation and effectiveness of theprogram beginning in 2007. Theprogram expires at the end of the fiscalyear in which the number of veteransenrolled in colleges is fewer than 4,000,but no later than June 30, 2011.

One-Stop Web site and Internet Support.$100,000 was allocated to create acentralized Web site containinginformation on benefits and servicesoffered by all levels of government, aswell as private organizations.

In addition to the appropriationscontained in Chapter 282, an income taxcredit for recent war veterans wasincluded in Chapter 259. Additionalinformation on this provision can befound in the tax section of thisdocument. Veterans policy provisionsare contained in Chapter 273.

State Board of Investment (SBI)A restructuring of funding for the SBIwas contained in Article 4 of Chapter277, the Omnibus Pension Bill. TheBoard will now be able to bill the StateRetirement Fund directly for its costs,

and deposit the billing receipts in aspecial revenue account for operatingexpenses. This change will reduce bothexpenditures and nondedicated receiptsin the General Fund. The change iseffective starting in FY 2007. Therevenue and expenditures for FY· 2007are $1.9 million.

A small General Fund appropriation willremain to support the investmentactivities directly related to the GeneralFund.



(Enacted 2005)

VERNOR

AMPAIGN FINANCING CHECK-OFF SUBSIDY

AMPAIGN FINANCE AND PUBLIC DISCLOSURE BOARD

ampaign Finance Total 4,998 22

TTORNEY GENERAL

General Fund 3,610

ovemor Total 285

EGISLATURE


General Fund 45,514 3,513 49,General Fund - statutory 16,564 16,56State Govt. Special Revenue Fund** 5,222 5,22Special Revenue Fund 438 43Federal Fund 2,566 2,56Environmental Fund 290 29Remediation Fund 968 96ttomey General Total 71,562 3,513 75,07ECRETARY OF STATE

General Fund 1,388 22

General Fund Transfers Out (3,610)


egislature Total 1,013

General Fund

Table 2FY 2006-2007 Biennial Spending by Agency and Fnnd

State Government Budget(dollars in thousands)

General Fund 274General Fund - statutory

General Fund 285Special Revenue Fund

Special Revenue FundHealth Care Access Fund

General FundGeneral Fund- Carryforward 1,013

STATE BOARD OF INVESTMENT

Secretary of State Total 52,149 39

State Auditor Total 274

STATE AUDITOR

66

4,59


147

91

2

2

(1)

256

256

150

91

100

5

150

305

255

(955)

2,377

2,378

1,62

1,62

ForecastChanges

130524

2

586

3,3085,100

4,194

4,334

4,33

3,710

8,1028,032

617

3,507

3,606

36,021

29,61613,706

10,262

43,322

18,97114,810

215,992

202,802

161,930158,32

(10,332

OriginalBudget

(Enacted 2005)

DIRECT COSTS

ept. of Employee Relations Total 1,360,235EPARTMENT OF REVENUE

EPARTMENT OF EMPLOYEE RELATIONS

EPARTMENT OF FINANCE

FFICE OF ADMINISTRATIVE HEARINGS

epartment ofFinance Total

APITOL AREA ARCHITECTURE BOARD


EPARTMENT OF MILITARY AFFAIRSepartment ofRevenue Total

Workers' Compensation Special Fund

ffice ofEnterprise Technology Total

General Fund

EPARTMENT OF ADMINISTRATION

Environmental Fund

epartment of Administration Total 222,312

Administrative Hearings*

ffice of Administrative Hearings Total

Health Care Access FundSpecial Revenue Fund

General Fund

State Airports FundHighway Users Tax Distribution Fund

INANCE NONOPERATING

inance Nonoperating Total

UBLIC BROADCASTING

Federal Fund


General Fund Transfer OutGeneral Fund

General Fund (34,774)


General Fund

General Fund

General Fund 12,250

General Fund

State Employees Insurance Pool* 1,296,383

General Fund

State Govt. Special Revenue Fund 13,89

Gift Fund 12

General Fund

Special Revenue Fund 22,72Federal Fund 3,941

Internal Service Fund*


General Fund

General Fund 42,513

Internal Service Funds* 139,22

OFFICE OF ENTERPRISE TECHNOLOGY

Table 2 continued

State Board ofInvestment Total

67

95,902,53

134,55


4

499

100

499

2

42

42

4

1,013

4,778

13,939

ForecastChanges

2120950

27800

2,751

5,600

1,072

1,695

2,006

8,504

11,026

95,9002,532

134,453

OriginalBudget

(Enacted 2005)

ATEUR SPORTS COMMISSION

CING COMMISSION

INNESOTA RETIREMENT SYSTEMS (MSRS)

eneral Fund - Carryforward 8,503

enera1 Fund 583,651enera1 Fund - Statutory 18,546

ort Claims Total 1,522

OUNCIL ON INDIAN AFFAIRS

ounci1 on Indian Affairs Total

ontingent Accounts TotalWorkers' Compensation Special Fund


ORTCLAIMS

OUNCIL ON BLACK AMERICANS

ouncil on Asian-Pacific Minnesotans Total 603

Highway Users Tax Distribution Fund

General FundState Govt. Special Revenues FundState Airports Fund

EPARTMENT OF VETERANS AFFAIRS

Trunk Highway Fund

ept. ofMilitary Affairs Total

epartment ofVeterans Affairs Total

ouncil on Black Americans Total


Gift Fund

General FundFederal Fund

Gift Fund 18

General Fund 542


General Fund 322

General Fund 479

General Fund 2,381

Trunk Highway Fund 1,200

OCAL PENSION AIDSGeneral Fund 53,664

General Fund

UND TOTALS-STATE GOVERNMENT BUDGET

Special Revenue Fund 106

Federal Fund

General Fund

Federal FundGift Fund

General FundSpecial Revenue Fund


CONTINGENT ACCOUNTS

GAMBLING CONTROL BOARD

COUNCIL ON ASIAN-PACIFIC MINNESOTANS

COUNCIL ON CHICANO AFFAIRS

Table 2 continued

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(Enacted 2005) AmountsGeneml Fund Transfers Out (13,942) (400) (14,342

nvironmental Fund 876 (1) 87ederal Fund 111,429 50 111,47ift Fund 59 5ealth Care Access Fund 3,564 3,56ighway Users Tax Distribution Fund 4,444 4,44emediation Fund 968 96

Special Revenue Fund 147,178 147,17State Airports Fund 102 10State Govt. Special Revenue Fund 19,919 19,919

runk Highway Fund 1,600 1,60orkers' Compensation Special Fund 15,01 15,01L FUNDS TOTAL 915,849 15,001 930,85

I--dm_in_is-:-t-:-ra_t_iv_e_R_e_a_rl-,,·ng""-s_* -+- 3.:...,5_0_+_ -+ 3,nternal Service Fund* 297,553 2tate Employees Insurance* 1,296,383 1,2 ,*Italicized funds are not included in fund totals but do reflect operations for the relevant agencies.**Includes $1.65 million spent by the Attorney General under agreement with the Medical Practices Board.

For more information on the fiscal actionsrelated to State and Local Government, contactKevin Lundeen, [email protected] orTom Bottern, [email protected]

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TAX AIDS AND CREDITS

Chapter 259, the Omnibus Tax Act,made a variety of modest changes toproperty tax aids and credits that willincrease General Fund spending by$720,000 for FY 2006-2007. Assummarized in Table 2, state spendingfor tax aids and credits will now total$3.034 billion for the FY 2006-2007biennium. Tax aid and credit spendingfor the FY 2006-2007 biennium is also

up $49.8 million relative to the budgetenacted in 2005 due primarily toforecasted increases for property taxrefunds and tax refund interest. Allappropriations for tax aids and creditsare paid from the General Fund.

Table 1Changes in Tax Aids and Credits Spending

(dollars in thousands)FY 2006-07 FY 2008-09

Enacted Changes Enacted Changes

Changes Affecting Property Tax Refunds:

Increased Met Council Transit Bonding Authority 0 (50)

Classification Ag. Homestead Inflation Adjustment 0 (510)

Retro. Rebate for Property Tax Refunds Tuition Waiver (120) 0

Biomass Electric Generating Facility 0 (20)

EMS Spec. Taxing District Levy Authority 0 (9)

Agric. Market Value Credit - Fractional Homesteads 0 30

Disparity Reduction Aid - Adj. for Class Rate Change 0 150

Mahnomen County Aid (600) 0

Total (720) (409)

Table 2Spending for Tax Aids and Credits, FY 2006-2007

(dollars in thousands)

2,983,735 49,790


(Enacted Amounts2005)

Property Tax Refunds 676,145 13,099 689,244

City Aid 921,381 (11) 9

Market Value Homestead Credit 563,513 (4,419) 559,094

County Program Aid 409,771 (66) 409,705

Other Tax Aids and Credits 412,925 41,187 454,112

Total Expenditures

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Agricultural Homestead LandBracket Inflation AdjustmentBeginning with the 2006 assessmentyear, the current $600,000 market valuethreshold separating first and second tieragricultural homestead classification willbe indexed to increase annually. Theadjustment is based on the ratio of theprevious assessment year's statewideaverage taxable market value ofagricultural property per acre of deededfarm land to the same measure for the2004 assessment year. The limit isrounded to the nearest $10,000. Theestimated limit for taxes payable in 2007is $690,000.

For more information on the fiscalactions related to Tax Aids and Creditscontact Susan Von Mosch,Susan. [email protected]

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Property Tax Refunds; TuitionWaiver IncomeRetroactive rebates were provided totaxpayers who were required to repaypart of a property tax refund based onthe inclusion of tuition discounts inhousehold income on a claim filed in2005 or earlier years.

Mahnomen County AidA onetime appropriation of $600,000was made to the city of Mahnomen,Mahnomen County, and the schooldistrict to compensate for the loss ofproperty tax revenue as a result of landlocated in the city of Mahnomen beingplaced in trust status.

CAPITAL BUDGET

Notable capital investments include:

• $71.0 million for local bridge andlocal road repair;

• $85.1 million for transit projects,including $60.0 million for theNorthstar Commuter Rail project;

General Fund debt serviceappropriations will increase by $6.8million in FY 2007 and by an estimated$67.8 million in FY 2008-2009 tofinance the new bonds. In addition,chapter 258 included direct GeneralFund appropriations of $1 million tosupport administrative costs related tovarious capital projects.

$3 million for the Clean WaterLegacy.

$10 million for grants to supportbioscience business development inthe state; and

$12.1 million for improvements atvarious veterans homes throughoutthe state;

$41 million for the first phase of atwo-part project to provide additionalresidential, program, and ancillaryservice capacity for the sex offendertreatment program at Moose Lake;

$33 million for improvements at thecorrectional facilities in Lino Lakes,Red Wing, Shakopee, and Stillwater;

As itemized in Table 1, Chapter 258appropriates funds for a wide variety ofspecific projects and general capitalimprovement programs.

•

To guide the expenditures for thedevelopment of bioscience businesses,the Legislature established theBioscience Business DevelopmentPublic Infrastructure Grant Program.Priorities for the grants awarded underthis program are delineated, along withspecification of the information thatlocal governments must, at a minimum,include when applying for a grant.

•

•

•

$115.7 million for facilities onUniversity of Minnesota campuses;

$191.4 million for facilities on theMinnesota State Colleges andUniversities campuses;

•

•

Chapter 258, the 2006 Omnibus BondingBill, provided $1.0 billion($999,980,000) for capital improvementprojects. Of this total, $874.7 million ofbonds will be repaid from the stateGeneral Fund, while $50.3 million willbe user financed. $71 million will berepaid from state transportation fundsand $10.7 million will be repaid throughthe maximum effort school loanprogram.

• $61.1 million for correctionalfacilities, including $28 million forthe Phase 2 expansion of theFaribault correctional facility and

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Table 1Bonding Projects 2006

Capital Investment Appropriations by Pro.iect and Al!encyPROJECT

IAGENCY AND PROJECT AMOUNTiADMINISTRATION DEPARTMENTIAsset Preservation 5,000,000!capital Asset Preservation and Replacement Account 4,000,000IHmong Veterans Statue 150,000IWorkers Memorial 100,000IAdministration Total $9,250,000IAGRICULTURElBiosafety Level 3 Agriculture Lab $1,500,000BOARD OF WATER AND SOIL RESOURCES (BOWSR)Grass Lake 2,iOO,OOCMinnesota River Area II 500,00CStreambank, Lakeshore Erosion Control 1,000,000Wetland Replacement Due to Public Road Projects 4,200,000IBOWSR Total $7,900,000CAPITOL AREA ARCHITECTURAL AND PLANNING BOARDK=apitol Building I $2,400,000!cORRECTIONS[Asset Preservation 5,000,000Minnesota Correctional Facility-Faribault 27,993,000Minnesota Correctional Facility- Lino Lakes 2,494,000lMinnesota Correctional Facility-Shakopee 5,375,000Minnesota Correctional Facility-Stillwater 19,580,000Minnesota Correctional Facility-Red Wing 623,000'"'orrections Total $61,065,000"'DUCATIONEarly Childhood Learning and Child Protection Facilities 500,000,Library Improvement Grants

IIMacPhail Music Center

5::,200lNett Lake"ducation TotalMPLOYMENT AND ECONOMIC DEVELOPMENTemidji Regional Events Center 3,000,000

lBioscience Business Development Public Infrastructure Grant Program 1O,000,00ClBumsville Water Treatment Facility 2,500,000Central Iron Range Sanitary Sewer District Treatment Facilities 2,500,000Clean Water Legacy 3,310,000\Greater Minnesota Business Development Infrastructure Grant Program 7,750,000tasca County Infrastructure 12~

Lake Superior Zoo-DuluthLewis and Clark Rural Water System Inc. 3,282,OOC

iLittle Falls Zoo 400,000

MinneapolisLowry Avenue Corridor 5,000,000Schubert Performing Arts and Education Center 11,000,00C

lMountain Iron-Energy Park 500,000

lRedevelopment Account 9,000,000lRedwood-Cottonwood Rivers Control Area 1,600,000

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Ifable 1 continued PROJECTIAGENCY AND PROJECT AMOUNTlRoseville-John Rose Minnesota Oval 500,000St. Paul

Asian Pacific Cultural Center 400,000Ordway Center 7,500,000

Southwest Regional Event Center 11,000,000State Match for Federal Grants 38,800,00Ctrotal Maximum Daily Load Grants 5,000,000lVirginia Regional Medical Center Helipad 600,000Wastewater Infrastructure Funding Program 23,300,000Willmar-Rice Memorial Hospital Dental Clinic 500,000Workforce Center Renovations 600,000

tEmployment and Economic Development Total $160,642,000IHOUSING FINANCESupportive Housing for Long-Term Homeless $17,500,000trransitional Housing 2,000,000Housing Finance Total $19,500,000HUMAN SERVICESAsset Preservation and Facility Design 3,000,000Moose Lake Sex Offender Treatment 41,321,000St. Peter Regional Treatment Center 2,500,000Statewide Security Upgrades 5,000,000Systemwide Redevelopment, Reuse, or Demolition 5,000,000Systemwide RoofRenovation and Replacement 1,500,000Human Services Total $58,321,000METROPOLITAN COUNCILCedar Avenue Bus Rapid Transit 5,000,000Central Corridor Transit Way 7,800,000-35W Rapid Transit 3,300,000

Metropolitan Regional Parks Capital Improvements 35,362,000Red Rock Corridor Transit Way 500,000lRobert Street Corridor Transit Way 500,000~nionDepot I $3,500,000lMetropolitan Council Total $55,962,000IMILITARY AFFAIRSIAsset Preservation 4,000,000lFacility ADA Compliance 1,400,00C!Facility Life Safety Improvements 1,000,000Lead Abatement and Range Conversion 1,029,000Starbase Minnesota 150,000l\{ilitary Affairs Total $7,579,000IMINNESOTA HISTORICAL SOCIETYCounty and Local Preservation Grants 1,000,000lHistoric Fort Snelling Museum 1,100,00ClHistoric Sites Asset Preservation 3,000,000lHistory Center Visitor Services 572,000Minnesota Historical Society Total $5,672,000IMINNESOTA STATE ACADEMIESIAsset Preservation 2,509,00CIFrechette Hall 25,OOCMinnesota State Academies Total $2,534,000MINNESOTA STATE COLLEGES AND UNIVERSITIESlHigher Education Asset Preservation and Replacement 40,000,000

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trable 1 continued PROJECTIAGENCY AND PROJECT AMOUNTIAlexandria Technical College 400,00C!Bemidji State University 700,00C!Century College 19,900,000lFond du Lac Tribal and Community College =1mInver Hills Community College,Lake Superior Community and Technical CollegeMetropolitan State University

~Minneapolis Community and Technical College 18,8Minnesota State College-Southeast Technical College, Red Wing 4,855,06cMinnesota State University, Mankato 32,900,000Minnesota State University, Moorhead 9,980,000iNormandale Community College 5,125,000~orth Hennepin Community College 350,000Northland Community and Technical College, East Grand Forks 300,000Mesabi Range Community and Technical College, Eveleth 300,000St. Cloud State University 18,500,000St. Paul College 3,000,000Southwest Minnesota State University 300,000lWinona State University 11,586,000Systemwide Initiatives 10,200,000Minnesota State Colleges and Universities Total $191,4!MINNESOTA ZOOLOGICAL GARDENAsset Preservation 7,500,000MasterPlan 7,500,000Minnesota Zoological Garden Total $15,000,000NATURAL RESOURCESStatewide Asset Preservation 2,000,000Dam Renovation and Removal 2,250,000Fisheries Acquisition and Improvement 2,000,000Fish Hatchery Improvements 1,000,00CFlood Hazard Mitigation Grants 25,000,000uarge-Scale Forest Land and Forest Legacy Conservation Easements 7,000,000Forest Roads and Bridges 1,000,000fLake Superior Safe Harbors 3,000,000,Local Initiative Grants 2,000,000Metro Greenways and Natural Areas 500,000lNative Prairie Bank Easements and Developments 1,000,000!Prairie Wetlands Environmental Learning Center 2,000,000lRegional Trails 1,133,000iRIM-Wildlife Area Land Acquisition and Improvement 14,000,000Scientific and Natural Area Acquisition and Development 2,000,000State Forest Land Acquisition 1,000,000State Forest Land Reforestation 4,000,000State Park and Recreation Area Acquisition 3,000,000State Park Infrastructure Rehabilitation and Natural Resources Restoration 3,000,000State Park Building Construction and Rehabilitation 3,000,000State Park Camper Cabins 2,000,000State Trail Acquisition and Development 10,811,000Stream Protection and Removal 2,000,000trrail Connections 2,010,000lWater Access Acquisition, Betterment, and Fishing Piers 3,000,000lWater Control Structures 1,000,000

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[fable 1 continued PROJECT~GENCYAND PROJECT AMOUNTNatural Resources Total $100,704,000PERPICH CENTER FOR ARTS EDUCATIONAsset Preservation :1 01:;1 001l

POLLUTION CONTROLCapital Assistance Program 4,000,000Closed Landfill Program 10,800,000Koochiching RECAP 2,500,000Pollution Control Total $17,300,000PUBLIC SAFETYScott County Public Safety Training Center $1,000,000TRANSPORTATIONGreater Minnesota Transit 2,000,000Local Bridge Replacement and Rehabilitation 55,000,000Local Road Improvement Program 16,000,000Northeast Minnesota Rail Initiative 1,300,000Northstar Commuter Rail 60,000,000Port Development Assistance 3,000,000lRail Service Improvement 3,700,000St. Cloud Regional Airport 2,000,000Irransportation Total $143,000,000

fNIVERSITY OF MINNESOTAligher Education Asset Preservation and Replacement $30,000,000uluth-Labovitz School of Business 15,333,000win CitiesCarlson School of Management 26,600,000Medical Biosciences Building Phase 1 40,000,000

University Research CentersCedar Creek Natural History Area 500,000Cloquet Forestry Center Classroom Addition 500,000West Regional Outreach Center, Morris 2,500,000

lWillmar Poultry Testing Laboratory 300,000University of Minnesota Total $115,733,000VETERANS HOMES BOARDAsset Preservation 6,000,000Fergus Falls Veterans Home 637,000Bastings Veterans Home Supportive Housing 700,000iLuverne Veterans Home 599,000lMinneapolis Veterans Home 2,457,000Silver Bay Veterans Home 1,697,000IVeterans Homes Board Total $12,090,000BOND SALE EXPENSES $948,000CANCELLATIONS $(7,800,000)TOTAL Chapter 258 $999,980,000

BOND PROCEEDS FUND (GENERAL FUND DEBT SERVICE) $874,737,000BOND PROCEEDS FUND (USER FINANCED DEBT SERVICE) $50,343,000MAXIMUM EFFORT SCHOOL LOAN FUND $10,700,000STATE TRANSPORTATION FUND $71,000,000GENERAL FUND $l,OOO,OOCBOND PROCEEDS CANCELLATION $(7,800,000)

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For more information on the fiscal actions related to State debt and CapitalExpenditures, contact David Jensen, [email protected] or MajaWeidmann,Maja. [email protected]

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MINNESOTA TWINS BASEBALL STADIUM

The 2006 Legislature authorized thefinancing, construction, and operation ofa new stadium for Major LeagueBaseball Minneapolis. Based onpreliminary designs discussed during thelegislative session, the new stadium willseat 42,000 fans and will be an open-airfacility. The Legislature intends that theballpark will be open by the 20I0season.

Chapter 257, the enabling legislation forthe new stadium, established theMinnesota Ballpark Authority to achievethe purposes of Chapter 257, includingbeing responsible for construction,operation, and long-term use of the newballpark. The authority will be governedby a five-member commission consistingof two members appointed by theGovernor; two members, including thechair, appointed by the county board;and one member appointed by theMinneapolis City Council. One of thegubernatorial appointees must be aresident of a county other than Hennepinand all other members must be residentsof Hennepin County. No member mayhave served as an elected official ofMinneapolis or Hennepin County fortwo years prior to appointment.

Stadium FinancingThe total costs to construct the ballparkare estimated to be $522 million. TheMinnesota Twins will contribute $130million, with the remainder coming fromlocal sources. Hennepin County isauthorized to expend up to $260 millionfor the ballpark, $90 million for land-siteimprovements and public infrastructure,and an estimated $42 million for debtservice costs.

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To fund the local portion of the stadiumconstruction costs, Hennepin County isauthorized to issue revenue bonds and toimpose a 0.15 percent local option salestax, without referendum. The countywas also authorized to make grants tothe ballpark authority for construction ofthe ballpark, capital improvementreserves, and other purposes related tothe ballpark.

In addition, the ballpark authority mustenter into long-term lease or useagreements with the Minnesota Twinsuse of the ballpark. The authority mustalso require the capital improvementreserve fund to be funded with annualpayments of $2 million. The team'sshare of these payments was set atapproximately $1 million and the countycontribution was capped at $1 millionannually.

Further, the legislation provides that upto $4 million per year of revenues inexcess of amounts needed for debtservice may be spent in equal amountsfor youth activities and amateur sportsand for extended hours for Minneapolisand Hennepin County libraries. The $4million may be increased by up to 1.5percent annually.

State Costs - Tax ExemptionsThe stadium financing plan includes nostate appropriations. However, asdiscussed in the State Tax RevenuesSection, Chapter 257 provides for a salestax exemption on the material andsupplies used for construction andimprovement of public infrastructure;the exemption for ballpark materialsexpires one year after the first game is

played, and five years after the issuanceof bonds for infrastructureimprovements. Chapter 257 also grantsa sales tax exemption for tickets togames and events sponsored by theMinnesota State High School League(MSHSL). The MSHSL is required todetermine the sales tax savingsattributable to this exemption andannually transfer that amount to anonprofit charitable foundation thatpromotes high school extracurricularactivities.

Any real or personal property of theBallpark Authority is also exempt fromlocal property taxes but is subjectto special assessments. The threepercent Minneapolis admissions andamusements tax may apply toadmissions for baseball events at theballpark.

Other Criteria and RequirementsThe Legislature established a variety ofcriteria and conditions on the work ofthe Ballpark Authority, including that:

• the lease or use agreement betweenthe baseball authority and the teamrequires that if the team is sold, apercentage (18 percent declining tozero over ten years) of the gross saleprice must be paid to the baseballauthority;

• the lease or use agreement alsorequires that if the franchiserelocates or dissolves, the team andMajor League Baseball will transferto the state the Twin's name, logo,records, and related items;

• the authority be provided access toannual audit financial statements of

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the team of other records deemednecessary to determine compliance;

• the team provide $250,000 annuallyfor youth activities and youthamateur sports; and

• the act also provides that, subject tothe rules of Major League Baseball,the Governor and the MetropolitanSport Facilities Commission (MSFC)must attempt to form a corporationthat is at least 50 percent owned bymembers of the general public. Thelease or use agreement must providethat, prior to any planned sale of theteam, the team must offer thecorporation first right of refusal topurchase the team.

MSFC may provide financial and otherassistance to the county and baseballauthority. MSFC is required to transfer$300,000 to the county by January 1,2007, for preliminary ballpark andinfrastructure construction costs, subjectto reimbursement from the county'ssales tax revenues.

Upon any future sale of the Metrodome,$5 million of the net proceeds go toHennepin County for the ballpark'scapital improvement reserve, and theremainder must be used to pay debtservice on bonds issued to pay forconstruction of a Vikings footballstadium. MSFC must transfer $5 millionfrom its cash reserves to Minneapolis forfuture infrastructure costs at the site ofthe Metrodome.

Vikings and Anoka CountyChapter 257 also directs representativesof Anoka County and the Vikings tonegotiate an agreement for developmentand funding of a football stadium in

Blaine and to report to the Legislature onsuch agreement by January 15,2007.

Contingent authority was granted toAnoka County to impose a 0.75 percentlocal option sales tax withoutreferendum to finance a football stadiumif a future Legislature enacts a lawproviding for the development andfinancing of a football stadium for theMinnesota Vikings in the city of Blaine.

Persons interested in following thestadium may log onto the Web site thatthe authority is required to establish.

For more information on the fiscalactions related to the Minnesota TwinsBaseball Stadium, contact Susan VonMosch, Susan. [email protected]

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UNIVERSITY OF MINNESOTA FOOTBALL STADIUM

The 2006 Legislature provided fundingfor a new 50,000-seat football stadiumon the University of Minnesota TwinCities campus. The $248 millionstadium will be funded 55 percent fromstate funds ($137.25 million), and 45percent from University sources($110.75 million).

Stadium FinancingThe financing package for the newstadium anticipates that the Universitywill issue bonds to completeconstruction by the 2009 collegiatefootball season. The bonds, withinterest, will be repaid from acombination of annual state paymentsand the University funding sources, butthe amount of bonds that can be issuedto fund the state share of constructioncosts is limited to $137,250,000. Whilethe cumulative stream of payments fromeach funding source over the life of thebonds will depend on various financingdetails, the funding sources and theportion of construction costs anticipatedto be financed by each include:

• state General Fund appropriations upto $10.25 million annually;

• a naming rights agreement with TCFFinancial Corporation ($20.5million);

• game day parking revenues ($13million);

• a $25 student fee to be phased inbeginning in the 2007 academic year($13.5 million); and

• University fundraising ($64 million).

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The state's annual General Fundpayments will not begin until theUniversity demonstrates that at least$110,750,000 has been committed forstadium construction from nonstatesources.

Further, materials purchased for theconstruction of the new stadium wereexempted from the state sales and usetax; an estimated savings of $5 millionfor the project during FY 2008-2009.

By July 1, 2007, the University mustdeposit $1.5 million into a mitigationfund to be used to mitigate the impact ofstadium construction and operation onthe community in close proximity to thesite. The University and the city ofMinneapolis must work with the stadiumarea advisory group to discuss short- andlong-term issues and concerns related tothe project, and the allocation of themitigation funds.

University Land TransferThe state's obligation to make annualpayments for the stadium is expresslyconditioned upon the University'scovenant, in perpetuity, limiting its useof 2,840 acres of University-owned landin U-More Park. Further, the Universitymust offer to convey such land for $1,no later than the date of last statepayment for debt service on the stadium.Chapter 247 also included a number ofprovisions addressing the terms of thesale and transfer of the land at U-MorePark to the state, including that:

• the "permitted uses" of theUniversity land were expanded toinclude outdoor recreation-based

uses consistent with those of parksand open space wildlife managementareas and natural areas, provided theimprovements have been agreed to inwriting by the University and theCommissioner ofNatural Resources;

• the University and the Department ofNatural Resources (DNR) must enterinto an agreement that delineates thepermitted and prohibited uses of theland and oversight activities;

• any agreement between the Board ofRegents and the DNR must providethat payments from leases ofUniversity land shall be dedicated tothe operation and maintenance of theland;

clean-up of any contamination of theland, and a process to resolve anydisputes that may arise between theUniversity, the DNR, and other parties.

Chapter 247 also provides that, from2007 through 2011, a portion of taconiteproduction tax revenues be distributed tothe City of Eveleth to support the UnitedStates Hockey Hall of Fame. Therevenue distribution is contingent uponthe Hall of Fame remaining in Eveleth,and the City of Eveleth demonstratingthat it has received private contributionsequal to the taconite production taxrevenue distribution.

•

•

the Commissioner of NaturalResources may request that theUniversity convey all or part of theland to the state and that the regentsshall convey the land as requested bythe DNR, which could includeconveyance of all or part of the landto DNR or to another governing unitof the state; and

the University must use duediligence to ensure that the federalgovernment fulfills its obligationsunder federal laws, including theDefense Environmental RestorationProgram and the ComprehensiveEnvironmental Response Compensation and Liability Act.

The University and the DNR mustsubmit a series of reports to theLegislature and the Governor delineatingthe status of discussions between the tworegarding issues associated with thetransfer and future development of theland, the entities responsible for the

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For more information on the fiscalactions related to the new University ofMinnesota Stadium, contact Susan VonMosch, Susan. [email protected] Maja Weidmann,Maja,[email protected]

EMINENT DOMAIN

The 2006 Legislature made significantchanges to the state's eminent domainlaw. The changes required no changesto state appropriations, but could haveimplications for the cost of completingstate-funded projects, such as roads orother infrastructure, could increase in thefuture. To the extent the change toeminent domain laws do affect the costsof state projects, the change mayinfluence the quantity and timing ofprojects rather than overall spendinglevels. The key features of the Chapter214 include that:

• the public benefits of economicdevelopment would not bythemselves constitute a public use orpurpose. Property could becondemned to mitigate blightor remediate environmentalcontamination, but only underspecified circumstances that aresubject to court review;

• property owners who contestcondemnation would be entitled torecover attorney fees under certaincircumstances. If the court foundthere was not a proper use orpurpose, or if the final damage awardwas more than 40 percent greaterthan the last written offer from thecondemning authority, an attorneyfee award would be mandatory. Ifthe final award was 20 to 40 percentgreater, the court could awardattorney fees;

• if condemned land is no longerneeded for a public purpose, theproperty owner would have a "rightof first refusal" to buy back the

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property before it could be sold toanyone else;

• other increases and changes aremade in the amount of appraisal feesthat may be awarded, relocationexpenses, reimbursement for loss ofa going business concern, and relatedprovisions; and

• negotiation requirements and relatedissues requiring potentialcondemning authorities to shareappraisals with property owners areexpanded.

For more information on EminentDomain law changes, contact KathyPontius, [email protected]

PENSIONS

The 2006 Legislature adopted twoomnibus public pension bills with fiscalimplications for state and local publicemployers and employees.

The most significant fiscal relatedchanges in Chapter 271-whichcontained many pension-relatedtechnical, administrative, and policychanges-were increased employee andemployer contribution rates to theMinnesota State Retirement System(MSRS) general plan, correctional plan,and state patrol plan. Both employer andemployee rates for MSRS wereincreased from4.0 percent to 5.0 percentof annual salary. For the correctionalplan, employee contribution rates willincrease from 5.69 to 8.6 percent andemployer contribution rates from 7.98 to12.1 percent; and for the state patrolplan, employee rates will go from 8.4 to10.4 percent, while employer rates gofrom 12.6 to 15.6 percent. The increasesfor all three plans will be phased in overfour years beginning July 2007. WhileChapter 271 made no appropriationchanges, state agency spending forpension contributions would increaseunder the legislation by an estimated $51million annually once the rate changesare fully effective in FY 2011. Absentincreases in appropriations for stateagency operations, the increased costswould need to be funded from existingbudgets.

Chapter 277 contained three majorreforms to public pensions andretirement programs in the first threearticles of the act.

Article 1, beginning in 2010, places afive percent per-year cap on

84

postretirement increases for members ofpublic pension funds that participate inthe Minnesota Post RetirementInvestment Fund. Under the old law,postretirement increases were based ontwo components: (1) a cost-of-livingadjustment of up to 2.5 percent per year;and (2) an investment-based adjustment,which was not limited. Under the newlaw, if investment earnings (combinedwith the cost-of-living adjustment)would cause the total increase to exceedfive percent in a year, the increase willbe capped at five percent and theremainder will be retained in the fundand will be available for futureincreases. In addition, postretirementincreases paid from the St. PaulTeachers Retirement Fund Associationwill be limited to five percent per-yearbeginning July 1,2010.

Article 2 reduces the augmentation ratefor deferred annuities to a flat 2.5percent per year from the time a personleaves employment until the personbegins drawing the pension. Under theold law, when a person left publicemployment but did not begin drawing apension, the amount of the pension wasincreased by three percent each yearuntil the person reached 55, and then byfive percent each year after that until theperson began drawing a pension. Thechanges apply to people first hired forpublic employment after June 30, 2006.

Article 3 merges the MinneapolisTeachers Retirement Association(MTRFA) into the Teachers RetirementAssociation (TRA). As part of themerger, the formula used to calculatebenefits for TRA members forcoordinated members was changed from

1.7 to 1.9 percent of the high-five salaryfor each year of covered service afterJuly 1, 2006. Employer and employee(teacher) contributions rates to TRAwere each increased 0.5 percent, with theincreased employer contribution nottaking effect until July 1, 2007. Finally,

. as discussed in the K-12 EducationChapter, state aid to school districts wasincreased by the amount needed to covereach district's increase in the TRAcontribution.

Chapter 277 also reduced General Fundappropriations for and restructured howthe state board of investment is funded(see State Government Chapter),modified some reporting requirements,and required two studies. TheLegislative Commission on Pensions andRetirement is to conduct studies of: (1)procedures used by major Minnesotapublic pension plans to provideinvestment-based postretirementincreases; and (2) the structure ofMinnesota combined investment fundsand the Minnesota postretirement fund.

For more information on the fiscalactions related to Pensions, contactKevin Lundeen,[email protected], orTom Bottern, [email protected]

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APPENDIX

87

APPENDIX-TABLE ASummary of FY 2006-2007 Biennial Budget by Budget Area and Fund*

(dollars in thousands)Original Forecast Legislative CurrentBudget Changes Changes Budget

Early Childhood EducationGeneral Fund I 208,312 2,833 12,990 224,135Federal Funds** 78,215 5,118 83,333

ISubtotal: Early Childhood Education 286,527 2,833 18,108 307,468

IElementary and Secondary EducationGeneral Fund 12,405,950 793,772 8,233 13,207,955Endowment School Fund 37,189 6,533 9 43,731Federal Fund 1,223,797 3,486 1,227,283Gift Fund 694 694Special Revenue Fund 22,519 22,519

Subtotal: Elementary and Secondary Education 13,690,149 803,791 8,242 14,502,182

lHigher EducationGeneral Fund 2,761,000 485 5,000 2,766,485

Federal Fund 8,795 8,795Health Care Access Fund 4,314 4,314Special Revenue Fund 42,154 3,006 45,160

Subtotal: Higher Education 2,816,263 3,491 5,000 2,824,754

Health and Human ServicesGeneral Fund 8,228,374 (67,645 115,036 8,275,765General Fund Transfers Out (191,987) (16,059 (6,238) (214,284)

Endowment Fund 2 2

Federal Fund 8,296,882 14,353 125 8,311,360Federal TANF Fund 466,727 (1,401 7,900 473,226

Gift Fund 1,792 1,792

Health Care Access Fund 818,633 (118,835) 5,332 705,130

Medical Education Endowment Fund 173,210 265 173,475Remediation Fund 400 400

Special Revenue Fund 635,891 1,194 6,438 643,523

State Govt. Special Revenue Fund 101,437 1,27 102,713

Subtotal: Health and Human Services 18,531,361 (188,128 129,869 18,473,102

[Environment and AgricultureGeneral Fund 374,178 8,597 17,023 399,798

Agricultural Fund 40,264 (522) 8 39,750

Endowment School Fund 438 438

Environmental Fund 117,152 (364 116,788

Environment and Natural Resources Trust 33,560 4,097 37,657

Federal Fund 96,577 4,433 101,010

Game and Fish Fund 182,327 (2,011 180,316

Gift Fund 5,189 5,189

Minnesota Resources Fund 0 1,00 1,007

Natural Resources Fund 146,042 5,21" 730 151,984


Special Revenue Fund 89,365 35 89,400

88

IAppendix Table A continued Original Forecast Legislative CurrentBudget Changes Changes Budget

State Government Special Revenue Fund 98 98Subtotal: Environment & Agriculture 1,147,546 46,793 21,893 1,216,232

Economic DevelopmentGeneral Fund 306,075 5,42~ 29,652 341,147

General Fund Transfers Out (71,406) (71,406)

Economic Protection Trust Fund 2,162 256 2,418Environment and Natural Resources Fund 700 90C 1,600Gift Fund 1,391 1,391

Federal Fund 680,371 31,668 712,039

Federal TANF Fund 153 153Iron Range Resources & Rehab Fund 52,204 27,142 79,346Petroleum Tank Release Fund 44,920 (1,910 955 43,965

Remediation Fund 1,400 1,400

Special Revenue Fund 128,334 10 128,344


Workers' Compensation Special Fund 206,844 4,57C 211,414

Workforce Development Fund 88,714 4,948 3,200 96,862

Subtotal: Economic Development 1,441,892 73,147 33,817 1,548,856

Public SafetyGeneral Fund 1,685,033 5,383 19,684 1,710,100

Federal Fund 155,300 798 156,098

Gift Fund 130 130Special Revenue Fund 78,465 200 78,665State Government Special Revenue Fund 89,129 89,129

Subtotal: Public Safety 2,008,057 6,181 19,884 2,034,122

TransportationGeneral Fund 205,187 550 692 206,429

Environmental Fund 98 98Federal Fund 597,342 17,056 3,532 617,930

Gift Fund 90 90

Greater MN Transit Fund 16,311 (708 15,603

Metro Area Transit Fund 246,821 (12,686~ 234,135

Highway Users Tax Distribution Fund 18,198 18,198

Municipal State-Aid Street Fund 242,745 242,745

County State-Aid Highway Fund 919,866 919,866

Trunk Highway Fund 2,463,013 (51,214 2,411,799

Trunk Highway Bond Fund** 251,215 (251,215 0


State Airports Fund 39,924 (2,300) 37,624

Subtotal: Transportation 5,153,651 (298,217 1,924 4,857,358

State GovernmentGeneral Fund 592,1541 14,952 5,799 612,905

General Fund Transfers Out (13,942) (400 (14,342

Environmental Fund 876 (1) 875

Federal Fund 111,429 50 111,479

Gift Fund 59 59

Health Care Access Fund 3,564 3,564

89

k\ppendix Table A continued Original Forecast Legislative CurrentBudget Changes Changes Budget

Highway Users Tax Distribution Fund 4,444 4,444Remediation Fund 968 968Special Revenue Fund 150,788 1,950 152,738State Airports Fund 102 102State Government Special Revenue Fund 19,919 19,919Trunk Highway Fund 1,600 1,600Workers' Compensation Special Fund 15,010 320 15,330

Subtotal: State Government 886,971 14,601 8,069 909,641Other Funds

General Fund--stat. appropriations 18,546 18,546State Govt. Special Rev.-Contract AG 18,546 18,546

~trativeHearings 3,50 3,50/

I Service Fund 297,553 297,553State Employees Insurance Fund 1,296,383 1,296,383

[fax Aids and Credits!F=d 2,983,735 49,790 720 3,034,245

1Fund Transfers Out (16,517) (16,517

Care Access Fund 950 950Special Revenue Fund 718 718

Subtotal: Tax Aids and Credits 2,968,886 49,79C 720 3,019,396

Debt Service & Capital ProjectsGeneral Fund 781,146 (24,219 7,779 764,706General Fund Transfers Out (781,146) 24,219 (6,779) (763,706)Debt Service Fund 1,161,214 (17,165 3,930 1,147,979

Subtotal: Debt Service & Capital Projects 1,161,214 (17,165 4,930 1,148,979

OtherGeneral Fund 54,065 14,428 68,493

Federal TANF Fund (1,000) (1,000)

Subtotal: Other 53,065 14,428 0 67,493

TOTAL: All Funds and Budget Areas 50,145,582 511,545 252,456 50,909,583

*Amounts reflect the amounts from Table 2 m the precedmg substantive chapters and may not beconsistent with Department of Finance Consolidated Funds Statements.**lncludes $5.118 million additional federal child care funding from the Federal Deficient Reduction Actof2005.

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APPENDIX-TABLE BSummary of FY 2006-2007 Biennial Budget by Fund*


FundGeneral Fund 30,585,209 804,346 222,608 31,612,163General Fund Transfers Out (1,074,998) 7,76C (13,017) (1,080,255)Agricultural Fund 40,264 (522 8 39,750Debt Service Fund 1,161,214 (17,165 3,930 1,147,979Economic Protection Trust Fund 2,162 25t 0 2,418Endowment Fund 2 0 0 2Endowment School Fund 37,627 6,533 9 44,169Environmental Fund 118,126 (365 0 117,761

Environment & Natural Resources Trust 34,260 900 4,097 39,257Federal Fund** 11,248,708 71,844 8,755 11,329,327

Federal TANF Fund 465,727 (1,248 7,900 472,379Game and Fish Fund 182,327 (2,011 0 180,316Gift Fund 9,345 0 0 9,345Greater MN Transit Fund 16,311 (708 0 15,603

Health Care Access Fund 827,461 (118,835 5,332 713,958

Highway Users Tax Distribution Fund 22,642 ( 0 22,642

Iron Range Resources & Rehab Fund 52,204 27,14,L 0 79,346

County State-Aid Highway Fund 919,866 0 0 919,866Medical Education Endowment Fund 173,210 265 0 173,475

Minnesota Resources Fund 0 1,00 0 1,007

Municipal State-Aid Street Fund 242,745 0 0 242,745Trunk Highway Fund 2,464,613 (51,214 0 2,413,399Trunk Highway Bond Fund 251,215 (251,215 0 0Metro Area Transit Fund 246,821 (12,686 0 234,135Natural Resources Fund 146,042 5,21 730 151,984

Petroleum Fund 44,920 (1,910 955 43,965

Remediation Fund 65,124 30,441 0 95,565

Special Revenue Fund 1,301,075 4,20C 8,633 1,313,908

State Airports Fund 40,026 0 (2,300) 37,726

State Govt. Special Revenue Fund 210,766 0 1,276 212,042

Workers' Compensation Special Fund HI,854 4,570 32f ')')6,744

Workforce Development Fund 88,714 4,948 3,200 96,862

TOTAL-All Funds 50,145,582 511,545 252,456 50,909,583*Amounts reflect the amounts from Table 2 m the precedmg substantive chapters and may not beconsistent with Department of Finance Consolidated Funds Statements.**lnc1udes $5.118 million additional federal child care funding from the Federal Deficient Reduction Actof2005.

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APPENDIX-TABLE CSummary ofFY 2006-2007 Biennial Budget by Budget Area*


!Budget AreaI Early Childhood Education** 286,527 2,833 18,108 307,468

Elementary and Secondary Education 13,690,149 803,791 8,242 14,502,182

Higher Education 2,816,263 3,491 5,000 2,824,754Health and Human Services 18,531,361 (188,128) 129,869 18,473,102

Environment & Agriculture 1,147,546 46,793 21,893 1,216,232

Economic Development 1,441,892 73,14 33,817 1,548,856Public Safety I 2,008,057 6,181 19,884 2,034,122

Transportation ! 5,153,651 (298,217) 1,924 4,857,358

State Government 886,971 14,601 8,069 909,641

Tax Aids and Credits 2,968,886 49,79C 720 3,019,396

Debt Service & Capital Projects 1,161,214 (17,165: 4,930 1,148,979

Other 53,065 14,42~ ° 67,493

rrOTAL - All Budget Areas 50,145,582 511,545 252,456 50,909,583*Amounts reflect the amounts from Table 2 in the preceding substantive chapters and may not beconsistent with Department of Finance Consolidated Funds Statements.**Inc1udes $5.118 million additional federal child care funding from the Federal Deficient Reduction Actof2005.

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a fiscal review

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