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The state budget: Winners and losers
by Tom Scheck, Minnesota Public Radio
July 14, 2005

Public education gained back some financial ground in the new two-year state budget, after several years of flat or decreased funding. (MPR file photo)

Now that the new two-year budget has been signed, perhaps the biggest winners are the nearly 9,000 state employees who were furloughed during the eight-day government shutdown. Those employees are now back at work. Many other interested parties are reviewing the fine print to sort out the winners and losers.

St. Paul, Minn. — If you're a parent, a teacher or a school board member, you're probably pleased with the new education funding law. It injects $12.6 billion into K-12 schools and early childhood education over the next two years.

The biggest increase is in the basic per pupil formula, which will increase 4 percent in each of the next two years. Scott Croonquist with the Association of Metropolitan School Districts says the boost helps school districts that are struggling financially.

"Parents should not be under the perception that all of the reductions that have been made over the last couple of years are going to be restored. But they can go forward with the confidence that the bleeding is going to stop," says Croonquist.

While school administrators are breathing easier, smokers will feel pinched, since the tax on a pack of cigarettes is going up 75 cents. The tax, which the governor calls a "health impact fee," also applies to other tobacco products.

That worries Howard Bream, who owns Stogies on Grand in St. Paul. He says the law will impose a new tax on everything in his store -- and will then double the existing tax on cigars. Bream says his customers may choose to buy their cigars elsewhere.

"If somebody can go on the Internet and order these same cigars, and save 70 percent in tobacco tax and 7 percent in sales tax, that's what they're going to do," says Bream. "It's all well and good to sit there and project these tax increases, but the revenue is just not going to be there like they're predicting."

While smokers may need to scrounge for extra change under the couch cushions, businesses and wealthy Minnesotans may be able to cancel appointments with their accountants. A Senate DFL plan to increase income taxes on the state's wealthiest residents, and a provision to close corporate tax loopholes, were both dropped from the budget deal.

Backers of a state-sponsored casino at Canterbury Park will also have to take their chances that they can pass their bill next session.

People on state subsidized health insurance can now go to the doctor's office without worry, since the governor's plan to cut at least 27,000 people off MinnesotaCare failed. Sue Abderholden with the Minnesota chapter of the National Alliance for the Mentally Ill says she's pleased Senate DFLers won their fight to maintain eligibility.

"Over one-third of the individuals who are on MinnesotaCare are individuals with mental illness who are working, so this was important so they can obtain their medication and treatment," said Abderholden.

Many lower income workers are also in line for a raise. Lawmakers passed a cost of living increase for people who work in long term care facilities. And workers who earn the minimum wage will get a $1 per hour increase, starting next month.

Legislative efforts to spend more money on roads and transit hit a speed bump, when Gov. Pawlenty vetoed a transportation bill that included a 10-cent increase in the gasoline tax.

Carolyn Jones with the Minnesota Chamber of Commerce says lawmakers took some steps to address short-term transportation issues. She says the bonding bill passed earlier this year provided money for roads, bridges and transit. But Jones says lawmakers need to address the state's long-term transportation needs.

"There still needs to be new dollars into the system," says Jones. "We have anywhere between a $700 million and a $1 billion shortfall in what is needed to address our transportation needs." Jones says the Chamber supports putting a question on the 2006 ballot, asking voters if they want to increase the gasoline tax a nickel per gallon for transportation purposes.

Gov. Pawlenty says he may be open to calling a special session to address the transportation issue, as well as new stadiums for the Twins and the University of Minnesota football team.

Maple Grove city administrator Al Madsen would welcome another special session. That's because lawmakers failed to pass a law that would allow a hospital to be built in his northwest suburb.

"It would have been nice to have a certainty of knowing that a hospital was approved, so we can all get on with our lives and start moving forward with the fact that we know there's going to be a hospital. Right now, we still don't know."

Lawmakers also accomplished some other major initiatives during the regular session, including doubling the state's ethanol mandate; increasing penalties for those making or selling methamphetamine; and instituting life sentences for repeat sex offenders who violate the law again.