Gov. Mark Dayton vetoed the omnibus jobs and economic development finance bill, which proposed reduced funding for all but a handful of jobs and housing programs in the 2012-2013 fiscal biennium.
Sponsored by Rep. Bob Gunther (R-Fairmont) and Sen. Geoff Michel (R-Edina), it would have spent $138.2 million from the General Fund — a 17.8 percent reduction from base funding levels.
Deep reductions to important programs
The spending cuts would have been mitigated with $16.3 million in one-time account transfers. Also, funding for programs that affect vulnerable populations would have largely been preserved.
In his veto letter, Dayton said the cuts were still too onerous. “(The bill) contains deep reductions to important programs that help spur economic development and job growth,” he wrote.
Overall, the bill would have provided biennial funding for the Housing Finance Agency, Department of Employment and Economic Development, Department of Labor and Industry and a number of smaller agencies. Most programs would have been reduced, with a few exceptions.
The bill would have infused $2 million of new money in the first year of the biennium into vocational rehabilitation services, in order to fully leverage federal dollars to help the disabled. The Housing Trust Fund, which funds rental assistance, would have received a $2 million boost. Finally, State Services for the Blind would have been given an extra $150,000, under the provisions.
In addition to a handful of funding increases, the bill would have kept certain programs from cuts, such as rental assistance for the mentally ill and family homeless prevention.
Dayton praised the bill’s emphasis on preserving funding for programs that serve disabled and vulnerable populations; however, he criticized the proposed budget cuts, which were far more numerous.
In the letter, Dayton detailed his objections to many of the proposed cuts, including:
• the elimination of the Minnesota Trade Office ($3.1 million total), which he said would damage businesses who need help exporting their products;
• a $1.6 million reduction to the Contamination Cleanup and Investigation Grant Program, which helps prepare contaminated land for redevelopment;
• a 12 percent ($1.1 million) cut to the Job Skills Partnership Program, which helps businesses pay for their employees to retrain;
• a 6.1 percent ($1.4 million) cut to Extended Employment, which he said would result in as many as 600 disabled Minnesotans losing their jobs; and
• a $107,000 reduction to the Minnesota Science and Technology Authority, which he said is needed to support entrepreneurial job growth.
According to Dayton, the cuts in the bill would have been “compounded” by the 15 percent reduction in the number of state workers required in the omnibus state government finance bill (HF577/ SF1047*/CH40), which he also vetoed. He said a 15 percent cut would mean 266 fewer workers at DEED, 64 fewer at DOLI and 32 fewer at HFA. He said the General Fund savings from these reductions would be minimal, because the agencies are only partially funded through General Fund dollars.
The governor also objected to the transfer of $16.3 million from accounts funded through penalties on unemployment insurance fraud cases into the General Fund.
Competitive grant programs created
Many of the reductions in the bill are tied to a plan to reform the way grant money is distributed through DEED, which currently serves as a pass-through agency for grant money that lawmakers earmark for specific nonprofit organizations. These nonprofits generally perform workforce and economic development-related services.
Under the bill’s provisions, beginning in fiscal year 2013, the current system of earmarking grant money would end. In its place, a series of three new competitive grant programs would be established: one for business development, one for adult workforce development and another for youth workforce development.
In part, the move toward a competitive grant process is intended to address concerns raised in a 2010 report from the Office of the Legislative Auditor on the state’s workforce programs. Among other key findings, the report stated that workforce grant recipients should be selected through a competitive process.
Though the organizations currently funded by DEED via pass-through grants would be able to compete for grant money under the new system, overall funding for these budget areas would be reduced. Programs rolled into the adult and youth workforce competitive grant processes would be reduced 15 percent, while those rolled into the business development competitive grant process would be reduced 17 percent.
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