BUDGET RESERVE CORRECTION: JUNE 18, 2019
Last week, I sent out my post-session newsletter to those of you who receive my Senate District 46 Capitol Updates emails. The newsletter included an incorrect explanation of actions taken on our state’s budget reserve. In order to correct the record, I am sending a clarified and more detailed account of our state’s budget reserve that can be found below. I appreciate your patience on the matter.
Budget Reserve
The last time the budget reserve amount was set in statute was in Minnesota Session Laws 2016, Regular Session, Chapter 189. The amount of the budget reserve defined in statute was $1,596,522. Since then, the amount has fluctuated during various points in the accounting cycle as mandated by law (e.g. November forecast transfers of 33% of the positive budget balance, certain cancellations and surpluses that transfer into the reserve, and other one-time uses of the reserve in special law).
At the end of last session, the amount in the reserve was $1.583 billion. At the November 2018 forecast, the budget reserve level grew to $2.074 billion due to (1) $90 million in cancelled funds appropriated for the premium subsidy program being transferred into the reserve, (2) $47 million in surplus funds for the Workers Compensation Assigned Risk Plan being transferred into the reserve, and (3) $354 million being transferred into the reserve based on the requirements of 16a.152 Subd. 1b (b), which mandates a transfer of 33% of the positive unrestricted budget balance ($1.074 billion) projected at the close of the biennium, as measured at the time of November forecast.
That background is helpful for analyzing the most recent policy change. Article 11, Section 17 of Chapter 6 (the omnibus tax bill), essentially undid all three of the transfers that resulted in the surplus growing from $1.583 billion to $2.074 billion by transferring the same amount ($491 million) from the budget reserve into the general fund. Effectively, the end-of-session budget reserve amount for FY 2019 is the same as the end-of-session budget reserve amount for FY 2018.
Looking forward, two other items related to the budget reserve are the contingent appropriations found in Chapter 11 (E-12) and Chapter 3 (Transportation). These contingent appropriations (i.e. appropriations contingent on an end-of-fiscal-year budget surplus), bypass the 33% November budget reserve transfer by using up a portion of the positive unrestricted budgetary balance that would have occurred. If a fiscal surplus is still present after those contingent appropriations, a 33% transfer based on that smaller amount of unrestricted balance will occur.
Thank you for your continued interest in the state legislature and our work serving Senate District 46. If you have any time-sensitive questions, comments, or concerns please call my office at 651-297-8065.
Regards,
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Ron Latz