- A 3 Minute Guide to the Minnesota State Budget –
The Biennial Budget Cycle
Minnesota enacts budgets for a two-year cycle (a biennium), beginning on July 1 of each odd-numbered year. The budget approved for the current biennium remains in effect from July 1, 2013 through June 30, 2015. By law, the Governor must propose a biennial budget in January of odd numbered years. Once enacted by the legislature, the budget can be modified in the “off-year” legislative session. As a result of state forecasts and other changes, it has become common for the Legislature to enact annual revisions to the state’s biennial budget. These revisions are referred to as supplemental budgets. The current budget numbers reflect updated estimates at the end of the 2014 legislative session. The state’s constitution requires Minnesota to maintain a balanced budget by the end of the budget cycle.
Budget and Accounting Structure
State government is organized into over 100 agencies, boards, and commissions representing a wide range of services. While many of the largest state agencies report directly to the Governor, elected officials or independent boards manage others. All agencies receive their spending authority from legislative authorizations called ‘appropriations’ that impose a legal limit on spending.
The state’s accounting system includes nearly 200 discrete funds that operate much like individual bank accounts with specific sources of revenue.
Where the Money Comes From
Minnesota receives most of its revenue from general taxes, licenses, fees, and federal grants. State laws and statutes designate where each individual revenue sources must be deposited and any restrictions on how it should be used to support state operating expenditures. The chart below displays the major revenue sources for the state in All Operating Funds for the current biennium. The Department of Revenue collects most of the general tax revenues, while federal grants, fees and other revenues are collected by various agencies.
The chart below displays the major revenue sources for the state General Fund in the current biennium. Sources of General Fund Revenues 2014-15 Biennium
Where the Money is Spent
The state’s current operating budget for the FY 2014-15 Biennium (from all operating fund sources) is $71.3 billion. A separate capital budget is the source of financing for major building, renovation, and land acquisition projects.
State expenditures are primarily paid for by general state tax revenues, federal funds, fee revenues, and other sources - such as earned interest and lottery receipts. The capital budget is primarily funded through general obligation bonds. Principal and interest on state general obligation bonds is paid by the general fund in the operating budget.
The General Fund - State Operating Budget
Approximately $39.6 billion, or about 56 percent, of state spending for FY 2014-15 is paid by the state General Fund. Because the Governor and legislature have the greatest discretion over how general fund revenues are spent, the general fund budget is usually the primary focus of state budget deliberations.
The following chart shows how general fund spending is allocated in the current biennium. Over three-quarters of spending occurs in two primary areas: education and human services. About 50 percent of total spending is for education, which includes the state share of funding for public schools (K-12), four-year colleges and universities, and two-year community and technical colleges. Health and Human Services spending accounts for 28 percent of the budget.
Historical General Fund Spending
In the last twenty years, the state general fund budget has more than doubled – going from $14.497 billion in FY 1992-93 to the current $39.587 billion in FY 2014-15. The 2010-11 biennium spending reflects a large decrease due to the economic recession.
Who Receives General Fund Money
As described above, general fund spending is allocated among various functional areas of the budget. But, also the spending occurs in different ways and can be broken down by who gets the money - operating expenditures. grants and payments to individuals. In FY 2003, 47 percent of general fund payments went to to school districts, while 27 percent were made to, or in behalf of individuals, such as health care payments, property tax refunds, and student grants. State agency operating expenses accounted for 11 percent of spending.