The Minnesota Economy

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The Minnesota Economy
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Raising money to do business
Spending money on business
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My Financial Picture

• Assets
• Bank accounts
• Savings
• Checking
• Credit Union - savings
• Retirement Accounts
• House, car, toys
• (Life Insurance)
• Expenditures stream of money going out
• Income taxes - federal, state
• Retirement accounts
• Living expenses
• House bills - mortgage, insurance, taxes
• Miscellaneous - utilities, food and drink,
  clothes, entertainment, gasoline etc
• Health care
• Principal and interest on borrowed money

• Streams of money that go into various assets
• The assets themselves some of which consist of
  "lifestyle" choices with an accumulated value
• Streams of money leaving asset pools that
  maintain the assets
• Income - stream of money coming in
• University pay
• Other pay
• Interest on various savings accounts
• Borrowed money - credit card, mortgage company,
  car loan company

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Maxims for Economic Health

• Pay for whatever you want now (pay as you go)
• Ties spending to current income plus assets
• Pay for whatever you want now sometime in the
  future (debt financing)
• Ties spending to future income plus future assets
  

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State Financial Picture

• Streams of money flowing into various asset pools
• Income from current - individuals, corporations,
  and transfers from the federal government
• Income from future borrowing (debt financing)
• Assets - the state's infrastructure - schools,
  roads, government, agriculture, etc. investments,
  dedicated funds
• Streams of money leaving assets - expenditures
  (some discretionary some not)

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The state needs to raise revenues for what  it
wants to do

• Minnesota Constitution
• Article X. Taxation
• Article XI. Appropriations and Finance
• Statutory Provisions
• Spending legislation not codified
• Regulatory Provisions
• Dept of Revenue
• Rural Finance Authority

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Truisms

• If a government decides to continue its
  responsibilities it will probably have to spend
  more and so will have to increase income
• If a government decides to assume additional
  responsibilities - to spend more - it has
  increase its income or go into debt
• If a government decides to shed responsibilities
  - to spend less - it can raise less income (tax
  relief)

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Several jurisdictions

• Federal
• State
• Local governments
• Counties
• Cities
• Townships
• Special purpose
• Each has revenue-generating and revenue-spending
  powers
• Local governments have the powers delegated to
  them by the states see Minnesota Statutes

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• How does the state get its income ?
• How does the state spends that income?

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Federal Aid to States
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Pawlenty says hell accept stimulus aid for
Minnesota

• A cash boost for rail in Minnesota (Star Tribune)
• 2009 Statistical Abstract (Bureau of the Census)
• Bush budget would cut federal aid to Minnesota by
  6.1 (Minnesota Budget Project)
• President Declares Emergency Federal Aid For
  Minnesota (Student Operated Press)

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State Aid to Local Governments

• State spending for local government aid
  (Department of Administration)
• Governor's budget hits Minnesota cities and
  counties (MPR)

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State Auditor

• Constitutional office charged with overseeing
  more than 20 billion spent annually by local
  governments in Minnesota
• Performs audits of local government financial
  statements, and by reviewing documents, data,
  reports, and complaints
• The financial information collected from local
  governments is analyzed and is the basis of
  reports

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• Government Finance (House Research)
• Fiscal Analysis Department Issue Briefs and
  Other Fiscal Documents (House)
• Governor presents budget plan January 27, 2009
  (Governors office)
• Budget - Minnesota Management Budget
• House Finance Committees
• Senate Finance Committees
• Senate Office of Fiscal Policy Analysis

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Minnesota Budget Process

• Each odd-numbered year the governor proposes the
  Operating Budget - the Biennial Budget
• Relies on projected income and includes
  expenditures for education, roads and bridges,
  technology, health care, public safety, housing,
  natural resources, agriculture, economic
  development, higher education, money that goes to
  state agencies and local units of government
• The legislature examines the proposal and enacts
  statutes that authorize appropriating money to
  particular activities

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Main Actors Executive Branch

• Governor presents budget plan January 27, 2009
  (Governors office)
• Budget - Minnesota Management Budget
• Prepares formal forecasts of state revenues and
  expenditures in November and February each year
  as required by state law
• Forecasts used by the Governor and Legislature to
  ensure that enacted budgets remain on track and
  in balance, and to plan for future budgets
• Forecast information is also used by
• bond rating agencies and other financial analysts
  to review the state's financial health,
• media who present information on the state's
  financial condition to the public

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• Each even-numbered year the governor proposes to
  borrow money for projects that exceed the current
  income of the state capital budget 
• The legislature examines the proposal and enacts
  statutes that authorize raising the necessary
  money by issuing (selling) state general
  obligation bonds
• Items funded in budget often include land
  acquisition, construction and repair of state
  buildings, state infrastructure, higher education
  facilities, and capital grants to schools and
  local governments
• Capital Budgets 1996-2008 (Minnesoat Management
  and Budget)

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Minnesota State Budget
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Governors Proposed FY10-11 Budget
General Fund Spending 33.611 Billion
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Proposed FY10-11 All Funds Budget
All Operating Funds Spending 57.648 Billion
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Bit light on revenue
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Budgets 1999, 2005
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State Appropriations

• Appropriations legislation does not appear in the
  Minnesota Statutes, only in the Session Laws for
  the respective years
• Appropriations legislation 2004
• Minnesota Laws, 2004 c.255
• The Fiscal Review (Minnesota Senate)
• Stadium Discussion Points ( Minnesota Senate)
• Transportation Funding (Minnesota Senate)

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Income

• Department of Revenue
• Manages the states revenue system
• Administer 28 different taxes, collecting over
  12 billion annually
• This money funds education, local government aid,
  property tax relief, social service programs,
  highways, and other state programs and operations
  
• Minnesota Tax Handbook 2000
• House Research. State Local Taxes
• House Research. Property Taxes

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• Minnesota Highways Finances
• MNDOT Transportation Funding 2006
• Department of Natural Resources Funding

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Dedicated Funds

• Transportation Funding
• Lessard Outdoor Heritage Council
• Constitutional Amendment Nov. 4 2008
• Permanent School Fund
• MINNESOTA'S PERMANENT UNIVERSITY LAND AND FUND -
  FISCAL YEAR 2007
• DISTRIBUTION AND USE OF REVENUE TO THE PERMANENT
  UNIVERSITY FUND
• FY08 Game and Fish Fund Report
• Funding Sources for Legislative Citizen
  Commission on Minnesota Resources

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Environmental and Natural Resources Trust Fund
Legislative Citizen Commission on Minnesota
Resources
Minnesota State Lottery 2005
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Minnesota State Investment Board

• Annual Reports

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Debt Financing

• Minnesota State Bonds (Minnesota Management and
  Budget)

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Senate leaders OK bonding plan

• 990 million state construction borrowing plan
  heavy on higher education projects was revealed
  by DFL Senate leaders March 21
• Approved in a show of bipartisan harmony by the
  Capital Investment Committee
• After another committee stop today, the bill
  drafted by Capital Investment Chairman Keith
  Langseth, DFL-Glyndon, is slated for a Senate
  floor vote Thursday
• The bonding bill is the traditional centerpiece
  of even-year legislative sessions, when many
  legislators eyeing reelection campaigns in the
  fall are eager to deliver job-creating building
  projects to their districts
• Gov. Tim Pawlenty has recommended 145 million
  less in bonding than the Senate bill
• The Republican-led House, which typically tries
  to hold down state borrowing, hasn't issued its
  plan yet

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Highlights of the bill

• 60 million for the Northstar commuter rail line
  linking Big Lake and Minneapolis
• 41.3 million to expand the commitment facility
  for sexually dangerous people in Moose Lake
• 40 million for a University of Minnesota medical
  bioscience building
• 19.6 million for a segregation unit at the
  Stillwater prison
• 11 million for the Minneapolis Schubert Theater
• 10 million to renovate the Ordway in St. Paul
• 9 million for renovations to the St. Paul Como
  Zoo
• 6.3 million for the St. Paul Union Depot transit
  hub
• 5 million each for transit lines along
  University and Cedar avenues
• A big loser is a hoped-for new arena at the
  Duluth convention center. Pawlenty recommended
  33.7 million for it, the Senate committee nothing

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Bonding Bill

• The Senate bill also ignores Pawlenty's 13
  million plan for the Minnesota Zoo and his 28
  million request for a second phase of expansion
  at the Faribault prison. Langseth said
  construction of the first phase is going so
  slowly that further funding can await the next
  round of bonding
• The Senate bill proposes outspend the governor in
  higher education. He disappointed university
  officials by recommending only 4.3 million
  toward the bioscience facility that they say is
  vital for Minnesota's competitiveness
• Counting 55 million in separate funding backed
  by user fees, the bill would borrow more than
  375 million for infrastructure at the U and
  facilities in the Minnesota State Colleges and
  Universities system. Pawlenty called for 105
  million less than that
• Environmental projects -- from flood and erosion
  control to wastewater treatment and state parks
  and trails -- make up another 185 million of the
  Senate bill. Transportation funding, including
  62 million for local roads and bridges, totals
  155 million

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Property Taxes

• Minnesota North Star ltproperty taxgt
• Property Tax Amounts by Type of Taxing
  Jurisdiction, 1996 to present (House Research)
• Summary of 2007 Property Tax Laws (Dept of
  Revenue)
• Green Acres and Agricultural Land Preservation
  Programs

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Tax Increment Financing

• Tax Increment Financing (Legislative Auditor)
• Tax Increment Financing Its Effect on Local
  Government Finances (CURA Reporter, 2003)
• TIF Bonds

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Local Governments

• Minneapolis Financial reports
• Minneapolis Community Planning and Economic
  Development Department
• Dakota County Budget Financial Reports
• Protecting the Environment

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University of Minnesota Finances
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Legislative Commission on Minnesota Resources
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Excelsior Henderson Motorcycle Company