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The Minnesota Economy

The Minnesota Economy. 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

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The Minnesota Economy

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  1. The Minnesota Economy

  2. 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 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 My Financial Picture

  3. 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

  4. State Financial Picture • Streams of money flowing into various asset pools • Income from present - individuals, corporations, and transfers from the federal government • Income from future – borrowing (debt financing) • Assets • Infrastructure – schools, roads, government, agriculture, etc. • Investments • Streams of money leaving assets – expenditures (some discretionary some not)

  5. The state needs to raise revenues for what  it wants to do • Minnesota Constitution • Article X. Taxation • Article XI. Appropriations and Finance • Minnesota Statutes • 270 – 271 Taxation • 272 – 289 Property Taxes • 289A – 293 Various State Taxes and Programs • 294 – 295 Gross Revenue and Gross Receipts Taxes • 296 – 299 Excise and Sales Taxes

  6. The state needs to raise revenues for what  it wants to do • Federal aid to States • User fees E.G. • Department of Natural Resources • Regional wastewater collection and treatment is funded entirely by user fees (Metropolitan Council) • Mileage-based user fees for Minnesota? (Center for Transportation Studies)

  7. 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

  8. Several jurisdictions • Federal • State • Local governments • Metropolitan Council • Counties • Cities • Townships • Special purpose – watershed districts, soil and water conservation districts, school districts • Each has revenue-generating and revenue-spending powers • Local governments have the powers delegated to them by the state

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

  10. Federal Aid to States (US Census Bureau) Minnesota could feel fury of federal budget cuts Star Tribune Feb 24, 2013

  11. Transportation Stimulus Projects (MNDoT) • 2009 Statistical Abstract (Bureau of the Census) • Federal Aid Programs For State Of Minnesota Disaster Recovery (FEMA) • Undergraduate Federal Aid • Minnesota Family Assistance: A Guide to Public Programs • Medicare and Medicaid • Social Security

  12. State Aid to Local Governments • Local Government Aid (House Research Department) • State spending for local government aid (Department of Administration) • The basics of local government aid in Minnesota (MPR Feb. 2011) • Thank LGA (ThanKLGA.og) • Local Government Aid Study Group (Sate Legislature)

  13. 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 reviews documents, data, reports, and complaints • The financial information collected from local governments is analyzed and is the basis of reports

  14. Income • Department of Revenue • Manages the state’s 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 • Taxes (House Research Department) • Property Taxes (House Research)

  15. Expenditures • Highway Funding • MNDoT Funding • Minnesota Highways Finances • Department of Natural Resources Funding

  16. Minnesota Biennial Legislative Session • Each odd-numberedyear the governor proposes an operating budget • How he thinks the state should raise necessary $$$ • How he thinks the state should spend $$$ • 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 raises revenue and appropriates money to particular activities

  17. Prepares formal forecasts of state revenues and expenditures in November and February each year • 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

  18. Budget for a Better Minnesota http://www.mn.gov/governor/budget/

  19. Chart: Highlights of Dayton's budget (Star Tribune Jan 29, 2013) • New taxes would net $2.1 billion • Sales tax rate would drop to 5.5 percent from 6.875 and broaden to most goods and services, including clothing items over $100 • Seven-county metro sales tax increase of 0.25 percent for transit • Top 2 percent of wage earners would pay a new, fourth-bracket rate of 9.85 percent • Corporate taxes would fall to 8.4 percent from 9.8 percent • Cigarette tax up 94 cents a pack, for total of $2.17 a pack • Property tax rebate of $500 a year for homeowners • Sales tax on Internet sales • Education increases for higher ed, special education, early learning, optional all-day kindergarten

  20. State Budget and Taxes • Budget - Minnesota Management & Budget • House Committees • Senate Committees • House Fiscal Analysis Department • Senate Counsel, Research and Fiscal Analysis Office • Government Finance (House Research) • Minnesota Budget Project (MN Council of Nonprofits)

  21. Proposed FY10-11 Source of Funds All Operating Funds Spending $57.648 Billion

  22. Governor’s Proposed FY10-11 Budget General Fund Spending $33.611 Billion

  23. State Appropriations • Appropriations legislation does not appear in the Minnesota Statutes, only in the Session Laws for the respective years • Minnesota Laws, 2012 <Minnesota Statutes – Minnesota Session Laws - keyword Appropriations> • The Fiscal Review (Minnesota Senate) • Stadium Discussion Points ( Minnesota Senate) • Transportation Funding (Minnesota Senate) • Transportation Related Appropriations & Authorizations (House Research Department)

  24. Dedicated Funds • Transportation Funding • Lessard Outdoor Heritage Council • Constitutional Amendment Nov. 4 2008 • Permanent School Fund • Minnesota’s Permanent University Land and Fund • 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

  25. Environmental and Natural Resources Trust Fund Legislative Citizen Commission on Minnesota Resources Minnesota State Lottery

  26. Capital Budget Process • 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 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 1996-2012 (Minnesota Management and Budget) • 2012 Capital Budget Request (Pollution Control Agency)

  27. Capital Budget • Preliminary State Agency Requests • Preliminary Local Government Requests • University of Minnesota’s Capital Request last year • May 2012 Governor Dayton signed bonding bill

  28. Minnesota State Investment Board

  29. Debt Financing • Minnesota State Bonds (Minnesota Management and Budget) • 2009 August 10 Minnesota Retains Credit Ratings (MMB) • Bond Rating for State Governments (US Census Bureau) • Beyond Bond Ratings (Kiplinger.com) • Bond Rating Drop Another Of States' Fiscal Woes (Stateline.org)

  30. Municipal Bonds • Minneapolis • Finance Department • Revenue Bond Program • Wayzata Public Schools • Minnesota Property Tax • Tax Increment Financing

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