Less money for jobs, housing

The budget deal between Republican legislators and Gov. Mark Dayton will leave less money for jobs, housing and economic development in the 2012-2013 biennium. However, it will preserve and even boost funding for a handful of programs for the disabled and small businesses.

Sponsored by Rep. Bob Gunther (R-Fairmont) and Sen. Geoff Michel (R-Edina), a new law reduces General Fund spending on jobs and economic development by 8.5 percent. The Housing Finance Agency, Department of Employment and Economic Development, Department of Labor and Industry and a number of smaller agencies are funded by the law.

An earlier bill proposed a much deeper overall cut of 17.8 percent. Dayton vetoed that bill May 24, arguing many of the program reductions were too onerous.

In total, $250.8 million would be spent over the two-year biennium, with

$169.4 million coming from the General Fund. A pair of one-time transfers from special unemployment insurance accounts would reduce the net General Fund impact to $154 million. The vetoed version of the bill would have spent $138.2 million.

The law will provide one-time funding increases for the Minnesota Investment Fund ($3 million), the redevelopment grant program ($2 million) and Enterprise Minnesota ($500,000). To help leverage federal funding, one-time appropriations are also made to Vocational Rehabilitation Services ($4 million) and State Services for the Blind ($300,000).

Extended Employment, the Minnesota Youth Program and YouthBuild are all spared from cuts included in the vetoed bill. Several grant programs funded through DEED will see reduced appropriations, however, as will a handful of housing programs.

Rep. Karen Clark (DFL-Mpls) said the law is better than the original bill, but said it still cuts funding for valuable programs like contaminated site cleanup grants.

Many of the law’s reductions are tied to a plan to reform the way grant money is distributed through DEED. The department currently serves as a pass-through agency for grant money that lawmakers set aside for certain nonprofit organizations that perform workforce and economic development-related services.

Under the law’s provisions, beginning in fiscal year 2013, the current system of earmarking grant money in law 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 Office of the Legislative Auditor report on the state’s workforce programs. Among other key findings, the report stated that workforce grant recipients should be selected through a competitive process.

The law also includes provisions to encourage lending to small businesses. Under the proposal, the state will guarantee up to 70 percent of loans made by qualified gap lenders — organizations that provide subordinate loans in conjunction with larger loans made by commercial financial institutions. The total guarantee amount would be capped at $1.5 million per loan.

The law establishes a loan guarantee trust fund for these purposes; however, no funding is provided for the program. The language is intended as a placeholder until more money is available.

Other selected provisions in the law include:

• authorizing DEED to retain up to 5 percent of the money appropriated for pass-through grants to monitor programs and services funded with the grant money;

• changing inspection requirements for manufactured homes and establishing a $1 million cap on manufactured home park owner payments into the manufactured home relocation trust fund; and

• making numerous technical changes to continuing education requirements for construction codes and licensing.

2011 Special Session: HF3/ SF2*/CH4