Economic stimulus and MN fiscal impacts

What’s happening with Minnesota’s proposed budgets for education and health and human services?

Changes to the state’s economic forecast, as well as funding from the American Recovery and Reinvestment Act, more commonly known as President Barak Obama’s economic stimulus package, are resulting in a bureaucratic do-over. The governor’s two planned budgets which originally contained deep cuts affecting the disability community are being rewritten. It may be mid-March when we see revised health and human services and education budgets, the most important documents in the everyday lives of the disability community. The budgets will still contain deep cuts.

The economic stimulus package contains billions of dollars for a wide variety of projects and programs for Minnesota. Of the total amount, $1.8 to $2 billion is dedicated to Medicaid and Medical Assistance.

The economic stimulus package was also a factor in the overall state budget shortfall. The financial forecast released March 3 was expected to outline a deficit of $6.4 billion. Instead, the federal funds have helped cushion that blow, to $4.57 billion for the 2010-2011 biennium.

At a capitol news conference, Tom Hanson, Minnesota Management and Budget Commissioner, described the forecast as a good news-bad news scenario. Although the stimulus funds are a help, the state still faces a deteriorating economy.

Estimates indicate the state will collect about $1.2 billion less in taxes over the next two years. State Economist Tom Stinson describes the current recession as the longest and deepest since World War II.

Uncertainty over the economic forecast and the impacts of the economic stimulus package has encouraged community members to attend and testify at recent legislative town hall meetings on the budget. The meetings wrapped up late last month. Mike Gude, of The Arc of Minnesota, pointed out in his testimony that it was difficult to speak about a changing budget. But he noted that supports for people with disabilities should be viewed as invested and should be protected. He reminded state officials that there are already about 5,000 Minnesotans waiting for services that would allow them to live in their community and that many more people with disabilities live with aging parents who won’t be able to provide care indefinitely.

St. Paul resident Scott Schifsky asked that state officials to be fair as they balance the budget. “I oppose state budget cuts to persons with disabilities that decrease their ability to live independently, to find work that is satisfying and contribute to their communities,” he said. Schifsky is a caregiver to his wife, who has lupus and recently lost her job. He urged state officials to consider tax credits to caregivers and other assistance that would keep people working and able to stay in their own homes.

New Hope resident Hunter Sargent, who has fetal alcohol syndrome, also spoke at a town meeting. He is able to live in an apartment and run his own business, with help from service provider Mains’l Services. “I urge you not to cut services that help people like me live life and contribute to our communities,” Sargent said. “Funding these services is not just line items on a state budget; they are real investments in real people.”

But now everyone must wait and wonder about the budget impacts. “We’re going to have to reprice all of the governor’s proposals,” said State Budget Director Jim Schowalter. He gave a report on the economic stimulus package and what it means to the Legislative Commission on Planning and Fiscal Policy Feb. 19. The commission is overseeing the economic stimulus package.

The health and human services budget is about 34 percent of Minnesota’s general fund budget. K-12 education, including special education, is 38 percent. Gov. Pawlenty had proposed deep cuts to health and human services programs, which would have affected a number of programs for people with disabilities. But in order to get the federal funds, Minnesota and other states must continue spending as they have on the programs, to meet the federal “maintenance of effort” requirements. Hanson told the legislative commission the state doesn’t intend to violate the maintenance of effort requirements.

But he and Schowalter also told the commission that they need to be mindful of the short-term nature of the federal funding. When that money is gone, it could result in further structural imbalances to the state budget and even more cuts. That could make a bad budget situation even worse in a few years.

The economic stimulus package provides $1.1 billion to Minnesota schools. This money could be used to cover a wide range of expenses, including expenses tied to special education.

Special education, itself would receive the second-largest allocation of the Minnesota education dollars, at $199 million. The largest sum, which could top $821 million, would be for schools to maintain their budgets. Special education funding at the federal level is a hot- button issue nationally, as local and state education leaders have long argued that the federal government doesn’t provide enough money to meet its mandates. But like the other federal dollars, this, too, is one-time funding.