Purpose

Clarifies how Minnesota should use any positive unrestricted general fund balance at the end of a biennium. The bill aims to align the budget reserve limit with the actual budget reserve account and to set a priority for allocating extra general fund money to specific accounts and programs, including school aids, while protecting the budget reserve fund.

Key Provisions

• Trigger for allocations

  • If the forecast shows a positive unrestricted budgetary general fund balance at the close of the biennium, the commissioner of management and budget must allocate funds in a defined priority order.

• Allocation priorities (in order) 1) Cash flow account established in subdivision 1, until that account reaches a specified target (noted in the bill as a defined amount). 2) Budget reserve account established in subdivision 1a, until that account reaches a specified target (noted in the bill as a defined amount). 3) The amount necessary to increase the aid payment schedule for school district aids and credits payments in section 127A.45 to not more than 90 percent, rounded to the nearest tenth of a percent, without exceeding the amount available; any remaining funds go to the budget reserve. 4) The amount necessary to restore all or a portion of the net aid reductions under section 127A.441 and to reduce the property tax revenue recognition shift under section 123B.75 subdivision 5 by the same amount.

• Administration and timing

  • The amounts required to meet these priorities are appropriated from the general fund within two weeks after the forecast is released, or as needed to meet existing appropriation schedules when transfers are involved.

• Coordination with education authorities

  • The commissioner of management and budget must certify the total dollar amount of the reductions described above to the commissioner of education. The commissioner of education must then increase the aid payment percentage and reduce the property tax shift percentage by these amounts, applying the changes to the current fiscal year and thereafter.

Significance and Changes to Existing Law

• Structural change to how positive budget balances are used: The bill establishes a formal priority order for allocating any positive unrestricted general fund balance at the end of a biennium.
• Conforms the budget reserve limit to the actual budget reserve account balance: Creates specific targets for cash flow and budget reserve accounts as part of the priority allocations.
• Direct impact on school funding and property taxes: Provides a mechanism to increase school district aid payments (up to 90%) and to reverse certain aid reductions, while reducing the property tax revenue recognition shift.
• Streamlined timing and authority: Requires rapid appropriation from the general fund (within two weeks of forecast) and mandates coordination between the budget office and the Department of Education to implement changes.

Implications and Who Is Affected

• School districts and local governments: Potential increases in aid payments up to the specified 90% cap, with corresponding reductions in certain property tax shifts.
• Minnesota Department of Education: Responsible for adjusting aid payment percentages and property tax shift percentages based on certified amounts.
• State budgeting process: Adds a formal, forecast-driven mechanism for applying surplus funds, prioritizing cash flow, reserves, and education funding.

Implementation timeline (high level)

• Forecast released → if positive balance, allocate according to priority.
• Within two weeks of forecast, appropriations made from the general fund.
• Education department adjusts aid payments and property tax shifts using certified amounts.
• Effects apply to the current fiscal year and thereafter.

Relevant terms - positive unrestricted budgetary general fund balance - cash flow account - budget reserve account - general fund - forecast - commissioner of management and budget - commissioner of education - school district aids and credits payments - aid payment schedule (section 127A.45) - net aid reductions (section 127A.441) - property tax revenue recognition shift (section 123B.75 subdivision 5) - appropriation schedules - reductions and certifications