Dozens of New Tax Laws, Funding for MN Kindergarten Go into Effect Today

A host of new laws, including a new tax tier for the highest paid Minnesotans and an expansion of early education with optional all-day kindergarten, go into effect today.

Here’s a brief look at some of the big-ticket items now on the books in Minnesota.

EDUCATION

The state will spend an estimated $15.7 billion on K-12 education over the next two years, an increase of $485 million. About half of the new money will go on the basic school funding formula, with increases of 1.5 percent each year. In a first for Minnesota, another $134 million will fund optional all-day kindergarten statewide starting in the fall of 2014.

Burnsville, of course, currently offers full-day kindergarten without tuition. But the district is still able to get state assistance for the new program under the new laws

Special education will get an additional $40 million. So will a program that will award thousands of early learning scholarships to 3- and 4-year-olds from low-income families.

The state will use any surplus in its General Fund at the end of fiscal year 2013 to speed repayment of money that legislators previously borrowed from schools. The state has already used surpluses to pay much of that tab, but the new law explicitly makes repaying schools the top priority for the money and requires the commissioner of Minnesota Management & Budget to estimate the amount of the surplus by Sept. 30, 2013.

HIGHER EDUCATION

Beginning with the 2014-2015 school year, the age of compulsory school attendance will increase from 16 to 17, unless the child has graduated.

The state will spend $2.8 billion on higher education over the next two fiscal years, an increase of  $250 million. The capstone of the plan is a two-year tuition freeze for resident undergraduates at the University of Minnesota and for all undergraduates at the Minnesota State Colleges and Universities system.

NEW TAXES

Nearly $2.1 billion raised through a new tax law is billed as an effort to bring structural stability to the state’s budget and provide property tax relief, while moving closer to paying back the money the state has borrowed from the schools during previous budget cycles.

Revenue will come largely from a new fourth-tier income tax rate and beefed up cigarette taxes along with closing some corporate loopholes and increasing other taxes on businesses. In turn, the money will go toward erasing the state’s projected $627 million deficit; paying for a $400 million property tax relief package and moving up the timeframe for paying back the $850 million the state owes the K-12 schools.

A negotiated end-of-session settlement produced a new 9.85 percent rate on the state’s high-income earners.

The new tax bracket will affect:

• married people who file jointly with a taxable income of more than $250,000;

• married people who file separately with a taxable income of over $125,000;

• heads of household with a taxable income of over $200,000; and

• single filers making over $150,000.

OVERVIEW

The new laws and tax codes also include legacy funding for arts and humanities projects, including the nearby Minnesota Zoo; funding for roads and bridges via a wheelage tax, expansion of the transit system via the Southwest Corridor project; a tax break for landowners via reduced property taxes and an increase in the Local Government Assistance program statewide.

A complete rundown of the state’s laws going into effect today can be found here.