~ 9.3% increase in funding without raising taxes; reserves at historic levels ~

Saying that government should stop paying for good intentions and start paying for better performance, Governor Tim Pawlenty today unveiled his FY 2008-09 budget proposal that includes key investments in K-12 and higher education, renewable energy, health care reform, tax relief and other areas.

The $34.4 billion balanced budget is 9.3% more than the previous two-year budget cycle and is funded through the growth in state revenue, not tax increases.

“We have come from a historic $4.5 billion deficit to a $2.2 billion surplus by setting priorities, spending smarter and holding government accountable,” Governor Pawlenty said. “Minnesota taxpayers deserve fiscal discipline and better results for their investment in our state’s future. My proposed budget is focused on better government, better energy, better education and better health care to make Minnesota an even better place in which to live and work.”

Governor Pawlenty’s budget proposal directs funding to the highest priorities while increasing the budget reserve to a record $700 million and maintaining a positive structural balance in FY 2011, even after accounting for inflation.

* figures in millions

K-12 and higher education initiatives account for 52 percent of new spending in the Governor’s proposed budget, 12 percent is targeted for tax relief and local aid, and funding is also provided for the Governor’s NextGeneration Energy initiative, Healthy Connections health care reform, and Military and Veterans Support Package.

NEW BUDGET INITIATIVES FOR FY 2008-09

Better Education: In an effort to raise student achievement from nation-leading to world-competing, Governor Pawlenty proposes to enhance pay for performance initiatives, invest in reforming and reenergizing Minnesota high schools, and targeted early childhood funding.

New initiatives in K-12 and higher education include:

• Up to 4% annual increase for schools for general purposes; 2% annual increase ($294 million) plus 2% annual bonus available based on performance as part of the “Successful Schools” initiative ($150 million). The one-time performance bonus may be used for any purposes, except for permanent salary increases.
• Minnesota 3R High Schools reform proposal to increase rigor, relevance and results - $75 million
• Early Childhood: targeted funding for at-risk children - $29 million
• Expand and strengthen Q Comp, the nation-leading pay for performance teacher compensation program - $13 million
• ACHIEVE II: rewarding students with post-secondary scholarships for taking challenging classes in high school - $92 million
• Incentives for the University of Minnesota and MnSCU to measure and improve performance in strategic areas - $50 million
• Funding for critical teaching and research programs - $71 million
• Advances in higher education infrastructure and classroom technology - $67 million

Better Energy: To move Minnesota to nation-leading energy independence through policies and investments in more renewable energy, more energy conservation, and lower carbon emissions, the Governor has proposed his “NextGeneration Energy Plan.”

New initiatives in energy policy include:

• Invest in new biomass technology to encourage next generation of biofuels - $10 million
• Grants for solar rebates, plug-in hybrid vehicles, methane digester grants - $5 million
• Grants to develop 1,500 additional E-85 fueling stations - $12 million
• Funding for competitive energy research grants - $10 million
• Funding for the PCA Green Fleets and Fuels program - $3 million

Better Health Care: To drive down costs, improve quality, and increase access to affordable health care for the uninsured.

New initiatives in health care include:

• Reform the health care system through Healthy Connections Initiative - $31 million
• Improve mental health service delivery and infrastructure - $45 million
• Expand QCare to pay for outcomes - $2 million
• Pay for performance incentives and increase in long-term care provider rates - $92 million
• Continue to promote E-health (electronic medical records) - $18 million

Tax Relief and Reform

Reiterating that “Minnesotans are not undertaxed,” Governor Pawlenty is proposing tax relief for Minnesota families, businesses and communities.

New initiatives in tax relief and reform include:

• Provide tax relief directed to individuals of $227 million - property tax relief of $150 million and income tax relief of $77 million
• Cap property taxes for cities and counties that receive more than 1/3 of general fund revenues from the state.
• Provide strategic tax cuts to grow jobs and industry - $54 million

Honoring our Military Heroes

In his State of the State address, Governor Pawlenty said, “We need a surge of support for our military families and we need it now.” The Military and Veterans Support Package will assist veterans, active military members, and their families.

New initiatives for military and veterans include:

• Exemption from state income tax for military pay and military pensions - $16.5 million and $41.9 million when phased in fully in four years
• Minnesota GI Bill that will provide education benefits to thousands of veterans and their dependents - $30 million
• Military and veterans outreach and support, including full funding for National Guard requests - $20 million

Ensuring Safe and Vibrant Communities

New initiatives in public safety, transportation, housing, and environment include:

• Add state troopers and aid to local public safety activities - $19 million
• Bonding of $1.7 billion and one-time funding to advance road projects and additional dedication of revenue for roads and transit - $167 million
• Continuing commitment to housing, focusing on the needs for homeless families and affordable housing - $44 million
• Permanent Clean Water funding to improve the environment and sustain economic growth - $40 million
• Continue preparedness activities for pandemic flu - $22 million

Maintain Minnesota’s Healthy Economy

New initiatives in economic development include:

• JOBZ extension - $0.5 million
• Reinvestment in business development funds that help stimulate economic development - $9 million
• Bioscience investments for MnSCU, the University of Minnesota-Mayo partnership and DEED - $42 million
• Proposal of new venture capital tax credit - $6 million

Other Key Issues Addressed

• Emergency bonding projects recommended - $60 million
• Technology investments advanced - $213 million
• FY 2007 deficiencies - $10 million

“We live in a changing world, with changing technology, changing culture, and changing economies," Governor Pawlenty said. “This budget will make our state more competitive, stronger financially, and more accountable to Minnesota taxpayers. I look forward to working with legislators to set our course during this important budget session.”

Budget documents can be found on the Governor’s Office website at www.governor.state.mn.us and the Minnesota Department of Finance website, www.finance.state.mn.us.  

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