Governor’s proposal impacts economic development, affordable housing and cultural programs


Minnesota’s recovery from the recession and our future economic success depends upon many factors, including our ability to train a quality workforce and maintain a solid public infrastructure. But the state also faces the challenges of replacing an aging workforce and retraining our workers to respond to changes in the economy. Governor Dayton’s budget proposal would have a mixed impact on many investments that have made Minnesota a good place to live and work, including funding for job training, affordable housing and cultural opportunities.

Governor Dayton proposes a mix of investments and cuts in workforce development. The Governor proposes to increase funding for Vocational Rehabilitation, which provides employment services for people with significant disabilities, by $2 million per year. There is also a $150,000 per year increase for State Services for the Blind, which helps Minnesotans who are blind, visually impaired or Deafblind with their employment skills. This increased funding would allow the state to draw down additional federal matching funds.

The Governor’s budget also includes reductions in funding for workforce development, including a $473,000 a year cut in grants to several nonprofits that provide employment services and small business assistance. There is also a $221,000 per year reduction to the Job Skills Partnership, which funds job training or retraining partnerships between educational institutions and businesses. In addition, the proposal would allow the Department of Employment and Economic Development (DEED) to withhold up to five percent (or $275,000 a year) from pass-through grants to nonprofits to cover DEED’s administrative costs.

The Governor also proposes to transfer just over $3 million per year from the Unemployment Insurance (UI) Contingent Account to the Workforce Development Fund to invest in additional help for dislocated workers and another $3 million a year to the general fund to help reduce the state’s budget deficit.

The Governor’s recommendations result in a net three percent increase in general fund spending for DEED (compared to base funding), the agency primarily responsible for workforce development in the state. However, because flood relief and other one-time spending from the current biennium will be ending, DEED’s budget in FY 2012-13 would still be lower than it was in FY 2010-11.

Governor Dayton protects housing services for vulnerable populations, but cuts funding for affordable housing development. In the area of affordable housing and housing development, Governor Dayton’s budget protects services for those who are homeless or at risk of being homeless, as well as rental assistance for those with mental illness. However, his budget includes a five percent reduction in base funding for the Minnesota Housing Finance Agency (MHFA), as well as the loss of nearly $800,000 in one-time funding from FY 2010-11. The programs hardest hit by these reductions include efforts to preserve and rehabilitate affordable housing units.

Governor Dayton recommends other reductions that will impact cultural opportunities in Minnesota. The Governor recommends a five percent cut to both the Minnesota Arts Board ($417,000 per year) and the Minnesota Historical Society ($804,000 per year), which will result in reductions in regional arts programming and historical preservation and education. 

Another major source of funding for these services is the Legacy Amendment, a constitutional amendment approved in 2008 that increased the state sales tax to support the state’s outdoor heritage, clean water, parks and trails, and arts and cultural heritage. In FY 2010-11, $93 million from the Legacy Amendment was dedicated to arts and cultural programs, including $43 million for the State Arts Board and $22 million for the Historical Society. The Governor does not indicate his priorities for how to spend the Arts and Cultural Heritage portion of the Legacy Amendment funds in FY 2012-13, leaving this question to be worked out during the rest of the legislative session.