A Glossary of Fiscal Terms & Acronyms

Money Matters: Number 00.07December 2000

This glossary is a resource document containing terms and acronyms commonly used by and inlegislative fiscal committees, and in the discussion of state budget and tax issues. The firstsection contains terms and abbreviations used in all fiscal committees. The remaining sectionscontain terms for particular budget subject areas, organized according to fiscal committeejurisdictions.

For further information, please contact the Chief Fiscal Analyst or the fiscal analyst assigned tothe respective House fiscal committee and subject area. A directory of the House Fiscal AnalysisDepartment personnel and their assignments appears on the next page.

Fiscal Analysis DepartmentMinnesota House of Representatives

A Glossary of Fiscal Terms & Acronyms

House Fiscal Analysis Department

Staff Assignments - 2001 Session

Committee / Subject Area Fiscal Analyst Telephone Room

Chief Fiscal Analyst Bill Marx 296-7176 373

Agriculture and Rural Development Finance Peter Skwira 296-4281 325

Environment & Natural Resources Finance Peter Skwira

Capital Investment John Walz 296-8326 376

Jobs & Economic Development Finance Ron Soderberg 296-4162 322

Higher Education Finance Doug Berg 296-5346 372

K-12 Education Finance Greg Crowe 296-7165 378

Family & Early Childhood Finance Katherine Schill 296-5384 374

Health & Human Services Finance Joe Flores 296-5483 320

Judiciary Finance Gary Karger 296-4181 330

State Government Finance Helen Roberts 296-4117 370

Transportation Finance John Walz 296-8236 376

Taxes Matt Massman

Paul Wilson

296-7171

296-8405

326

328

Ways & Means Bill Marx 296-7176 373

The House Fiscal Analysis Department Home Page is at: http://www.house.leg.state.mn.us/fiscal/FAHOME.HTM The Web page has fiscal staff publications from recent years as well as spreadsheets for the major finance bills for thepast five legislative sessions.

Table of Contents

General Terms and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 1

Capital Investment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 8

Jobs and Economic Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 10

Housing Terms and Acronyms . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 11

Education

Family and Early Childhood . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 14

K - 12 Education Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 17

Higher Education . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 19

Environment and Natural Resources, & Agriculture

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 22

Health and Human Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 25

Judiciary Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 34

State Government Finance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 36

Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 40

Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page 53

General Fiscal and Budget Terms, Page 1

General Terms and Acronyms

Appropriation - Authorization by the Legislature tospend money from the state treasury for purposesestablished in law. The Minnesota Constitution prohibitspayment of money out of the treasury unless authorizedby an appropriation. (Also see standing appropriation anddirect appropriation.)

Appropriations Cap - Legislatively-placed limits onspending in the biennium following the budget periodunder consideration (i.e., budget “tails”). Caps allowspending projections to be lower than they wouldotherwise be under current law; that is, lower than ifcurrent spending levels were projected forward.

Allotment - Administratively-placed limits on theamount to be spent or encumbered for a legislatively-authorized purpose. Agencies develop a spending planbased on appropriations; then money is allotted for eachexpenditure. In the accounting system, allotments act asa control, prohibiting spending beyond the establishedlimits.

Annualization - The practice of adjusting spendingtotals to determine the annual costs of programs thatwere funded for only a portion of the previous year. Forexample, the annualized cost of a program that cost$500,000 for six months of operation is $1,000,000.

Balanced Budget - The requirement imposed on thestate’s general fund biennial budget that revenues mustbe greater than or equal to expenditures. Theconstitution authorizes borrowing for cash flow purposeswithin a biennium only (Article XI, Section 6).

Base - Usually calculated from the most recent amountspent by an agency for a program, the base is the agency’scurrent spending level with adjustments made for costsnot likely to recur. The base is determined frominformation in legislative tracking spreadsheets andlanguage in appropriations bills.

Base Adjustments - Adjustments to the base budgetallowed by the Executive Branch in the Governor’sbudget recommendations. “Technical” base adjustments

are those that make adjustments to a base to conformwith legislative directions. “Policy” or “Current ServiceLevel” base adjustments allow the Governor to recognizecertain cost adjustments (such as salary increases or leasecost increases) as part of the budget base rather than asa change request.

Biennial Budget Documents - Budget documentscontain narrative and fiscal information at the budgetactivity level for each state agency and is distributed inseveral loose-leaf notebooks. M.S. 16A.11 requires theGovernor to submit his budget message and detailedoperating budget recommendations by the fourthTuesday in January in odd-numbered years. (However, inthe year following the election of a new Governor, thebudget recommendations must be submitted by the thirdTuesday in February.) The Department of Finance isrequired to submit the final budget format, agency plansand budget estimates to the Legislature by November 30of the year prior to release of the Governor’s budget. TheFinance Department is also required to seek theinvolvement of the Legislature in developing budgetforms and instructions, and in designing the budgetdocument format.

BBS, Biennial Budget System - The informationsystem used by the Department of Finance to prepare thebudget documents, and by the executive and legislativebranches of government to keep track of appropriations.

Biennium - Minnesota has a two year (biennial) budgetperiod. The Legislature appropriates the major portionof the budget in the odd-numbered year session, andmakes adjustments as needed during the even-numberedyears. For example, the FY 2002-03 biennium wouldbegin at midnight on June 30, 2001 and would end atmidnight June 30, 2003.

Budget - The plan or authorization for revenues andexpenditures in a fixed period of time. State law (M.S.16A.11 Subd.2) requires the Governor to present abalanced budget to the Legislature for consideration inJanuary of each odd numbered year. The budget issubmitted in three parts: (1) the Governor’s budgetmessage, including a summary and the Governor’s

House Fiscal Analysis Department, December 2000


recommendation on state financial policy, (2) thedetailed operating budget and (3) the detailed capitalbudget.

“Off-budget” - Non-General Fund revenues andexpenditures, pass-through funds, certain dedicatedmonies, intergovernmental revenues and inter-fundtransfers.

“On budget” - Part of the General Fund.

Supplemental Budget – Refers to either (1) thebudget considered in even-numbered years or (2)changes to the original budget documents submittedby the Governor (usually based on revised estimatesof forecasted revenues

and expenditures).

Budget Reserve or Reserve - State law establishes aBudget Reserve separate from the Cash Flow Account(M.S. 16A.152). The Reserve is like a savings accountand serves as a hedge against an unforseen economicdownturn. Reserve funds may be spent in the eventexpenditure are forecast to exceed revenues, but onlyafter consultation with the Legislative AdvisoryCommission.

Budget Resolution - The Permanent Rules of the House(4.03), require that within 15 days following the releaseof a revenue and expenditure forecast during thatsession, the House Ways and Means Committee mustadopt a resolution which sets maximum limits onGeneral Fund expenditures and revenues, and establishthe amount of the Budget Reserve. Subsequently, theWays and Means Committee reconciles finance andrevenue bills, to ensure that the budget resolution limitsare not exceeded. The Senate has a less formal processfor establishing spending and revenue limits.

Budgetary Balance - The amount of money left on thebottom line of the General Fund balance afterexpenditures and money set aside in the Reserve/CashFlow Account have been subtracted from revenues.

Cambridge Bank Funds - A special fund establishedto pay off revenue bonds issued to pay a judgementagainst the state to the Cambridge State Bank and other

banks (M.S. 16A.67). Through June 30, 2001, a varietyof state non-tax revenues (lottery, state agency fees) arededicated to this purpose.

Cancellations - Money appropriated but unspent andunencumbered at the end of a biennium, which iscancelled or added back to the General Fund balance.

Carryforward - The practice of allowing agencies to useunspent money in the year following the year for whichit was appropriated. Upon the approval from the FinanceDepartment, agencies may carry forward unspent andunencumbered non-grant operating balances from thefirst year of the biennium to the second. (M.S.16A.28)(The Legislature may spend an appropriation forall or part of a biennium in either year of the biennium.The Courts and Constitutional Officers may spendmoney from either year of the biennium if funds areinsufficient in either the year.)

Cash Flow Account - State spending is not constantacross the fiscal year, but rather has peaks and valleysbased on patterns of receipts and expenditures. A CashFlow Account (separate from the Budget Reserve) isestablished, in a amount specified by law, to avoid short-term borrowing during cash low points (M.S. 16A.152,Subd. 1).

Change Request - The term used to characterizeExecutive Branch requests for budget changes from baselevels.

Claims - Certain claims against state agencies oremployees are determined by the Legislature. Theseclaims are reviewed by a joint House-Senatesubcommittee and then considered as a bill by the fullHouse and Senate.

Complement - Total number of employees. TheLegislature no longer sets limits on agency complements.However, information on full time equivalent positionsin agencies must be included in the biennial budgetdocument.

Consolidated Fund Statement - A summary ofrevenues, expenditures, reserves and year-end balancesfor all the state’s operating funds.



Contingency Funds - An appropriation(s) that may bespent with approval of the Legislative AdvisoryCommittee when the Legislature is not is session, tomeet emergencies. In a typical biennium, less than $1million in total is available for the contingency accountfrom the General Fund, the State Government SpecialRevenue Fund, and the Workers Compensation Fund

CPI-U, Consumer Price IndexSSUrban - A measure ofinflation intended to capture the increased prices facingconsumers for a fixed market basket of services andgoods, including food, housing, transportation, clothing,medical care, and entertainment.

Current Spending - Similar to “base” in meaning. TheDepartment of Finance defines current spending asactual spending with adjustments, such as removing one-time appropriations or non-recurring expenditures. Formost agencies, current spending is less than actualspending and usually is the base on which the budget isbuilt.

Debt Service Fund - See “Capital Investment” section.

Dedicated Revenue or Expenditures - Money raisedand earmarked to be spent for specific purposes.

Departmental Earnings - Money collected by stateagencies through service user fees, occupational licensecharges, regulatory charges, special taxes andassessments and other revenues. In general, agencies arerequired to set charges at levels that ?neithersignificantly over recovers nor under recovers costs,including overhead costs, involved in providing theservices” (M.S. 16A.1285).

Direct Appropriation - An appropriation for a specificamount of money, for use only during a specific timeperiod. Most appropriations in omnibus bills are directappropriations. Appropriations are usually for a singleyear of the biennium; however, legislation occasionallymakes single year appropriations available either year ofthe biennium.

Earmark - To dedicate or designate a revenue streamfor a specific purpose or expenditure.

Encumbrance - Commitment of money to meet anobligation that is expected to be incurred to pay forgoods or services received by the state, or to pay a grant.Encumbrance is the accounting control device thatagencies use to reserve portions of their allotments forexpenditures that will soon be incurred. Agencies mustencumber money before they can spend it, providing asystem to keep track of outstanding obligations.

Enterprise Funds - Funds that provide money forservices to the general public through programs that areexpected to recover their full costs, primarily throughuser charges. Examples include the Higher EducationServices Office Student Loan Fund, the State LotteryFund, the Chemical Dependency Treatment Fund, andthe Private Employers Insurance Fund.

EBO, Executive Budget Officer - Department ofFinance personnel who are assigned to specific budgetareas and who are responsible for developing theGovernor’s budget and tracking legislative actions.

Federal Funds - Revenues received by the state fromfederal government appropriations. Federal funds aredeposited in the state treasury and must be appropriatedto be spent.

Federal matching requirements - A requirement thatthe state commit a specific amount of state funds for aparticular purpose to obtain federal funds for the samepurpose. In general, percentages vary from 0 to 50percent. For example, a federal grant that requires a tenpercent match would involve $10 million (state funds)and $90 million (federal funds) for a $100 millionproject. The amount of funding the state must commitis often referred to as the “state match.”

Fiduciary Funds - Account for assets held by the statein a trustee capacity or as an agent for individuals,private organizations, other governmental units and/orfunds. These include pension trusts funds,nonexpendable trust funds (where the principal may notbe expended, e.g., the Permanent School Fund,Environmental and Natural Resources NonexpendableTrust Fund), expendable trust funds (e.g., the MunicipalState-aid Street Fund, County State-aid Highway FundEnvironment and Natural Resources Expendable Trust



Fund, Reemployment Compensation Fund), and agencyfunds, such as the Deferred Compensation Fund.

Finance, Department of - The agency with broadpowers to administer the financial affairs of the state,among them the responsibility to develop and presentthe Governor’s budget, produce forecasts of staterevenues, expenditures, and debt capacity, to prepareand oversee fiscal notes, and to manage the state’scapital indebtedness and capital bonding. TheCommissioner of Finance is designated in statute as thestate’s chief accounting officer, principal financial officerand the state controller.

Fiscal Note - Official estimate of expenditures or non-tax revenues resulting from proposed legislation,prepared by agencies or fiscal staff. State statute (M.S.3.98) requires that fiscal notes be prepared at the requestof the chair of the standing committee to which a bill hasbeen referred, or by the chair of the Ways and MeansCommittee of the House or Finance Committees of theSenate. State law defines the required components of afiscal note. The Department of Finance is responsible foroversight of the processing, preparation, delivery andupdating of fiscal notes, and for assuring their accuracyand completeness. (For tax revenue estimates, seeRevenue Estimates.)

Fiscal Year - The 12-month period on which the statebudget is based; it runs from July 1 to June 30. Schooldistrict fiscal years are the same as the state fiscal year.County and city fiscal years are the same as the calendaryear. The federal fiscal year runs from October 1 toSeptember 30.

Forecast - Each year in November and February, theDepartment of Finance is required to predict staterevenues and expenditures based on current law (M.S.16A.103). This prediction is the “forecast” upon whichthe Governor and the Legislature base their budgetproposals. The State Economist uses both nationaleconomic forecasting data and Minnesota - specific data.Within the forecast process, the Department ofRevenue is required to forecast revenues to be receivedby school districts, counties and towns. The FinanceDepartment is also required to submit a debt capacity

forecast at the same times as the revenue andexpenditure forecast.

Fund Balance or Fund Statement - A summary ofrevenues, expenditures, reserves and year-end balancesfor a fund or funds. This term is most often used withthe general fund

GAAP, Generally Accepted Accounting Principles- uniform standards for government accounts. Most statefunds are accounted for using the modified accrual basisof accounting which recognizes the unique revenue andexpenditure issues for some state payments.

GDP, Gross Domestic Product - the total value of allgoods and services provided in a country by residents andnon-residents of that country.

GDP Implicit Price Deflator - An inflationary measureintended to capture changes in the average price ofgoods and services in the U.S. Unlike the CPI-U, whichmeasures changes in a fixed groups of goods and services,the price deflator measures a changing mix of goods andservices and includes consumer expenditures, privateinvestment, government spending and exports net ofimports.

General Fund - The largest fund in the state treasury,into which receipts from the major taxes are deposited(e.g., individual and corporate income, sales, motorvehicle, cigarette and liquor, etc.). Most of the money inthe General Fund is not earmarked for specific purposes.The General Fund is the major source of funding foreducation, health care and human services and othermajor functions of state government. (Also, see specialfunds.)

GSP, Gross State Product - A measure of stateeconomic output.

Internal Service Funds - Funds internal to theoperation of state government that provide a variety ofservices to state agencies, such as computer services,motor pool, and printing. The funds must recover thefull costs of services provided through billing back stateagencies.



K-12 - Kindergarten through grade twelve.

Legislative Advisory Commission (LAC) - JointHouse-Senate legislative commission assignedresponsibility for approving the acceptance of federalgrants when the Legislature is not in session and theallocation of emergency contingent funds. The LAC alsoadvises the Governor on issues such as spending from theReserve when receipts are less than projectedexpenditures and on certain contingent appropriations.

Local Impact Notes - An estimate of the cost of certainlegislation or administrative rules (after December 31,1999) proposing state-mandates that have fiscal impactson political subdivisions. Notes are prepared by theDepartment of Finance at the request of the chair or theranking minority member of the House or Senate TaxCommittee.

Mandates - Requirements imposed by one level ofgovernment on another. “Mandate” may refer torequirements imposed by the funding level ofgovernment that must be met by the recipientgovernments in order to receive funds.

MAPS - See the “State Government Finance” section.

Object Code - The lowest level of detail provided inthe biennial budget document. Examples of object codesare personal services (salaries), contracts, and capitalequipment.

Omnibus Bill or Act - A collection of separate bills orappropriations in a single, large bill or act.

Open Appropriations - A form of standingappropriation where the level of funding necessary tofulfill the obligation is made available in the fiscal year.The state fund balance shows an estimate of the amountexpected to be spent. Many of the programs funded byformula (e.g., education aids and Homestead andAgricultural Credit Aid - HACA), and programsfunded through fees, are open appropriations.

Performance Based Budgeting - Settingappropriations based on expected agency performancelevels or with the intent of encouraging certainperformance. Performance base budgeting focuses onagency or program outcomes rather than inputs.

Performance Based Reporting - A system thatidentifies specific goals and objectives and attempts tomeasure progress toward those goals. The system isintended to focus on the outcomes, or effects, ofgovernment activities, rather than on inputs, such as thenumber of employees performing an operation.Performance data must be included in the biennialbudget documents.

Personal Income - In national economic accounting,personal income is the income received by persons:individuals, owners of unincorporated businesses(including partnerships), non - profit institutions, privatetrust funds, and private non - insured welfare funds.Personal income is the sum of wage and salarydisbursements, other labor income, proprietors’ income,rental income of persons, dividends, and personalinterest income and transfer payments, less personalcontributions for social insurance. —Dictionary of U.S.Government Statistical Terms, (Source: U.S. Departmentof Commerce, Bureau of Economic Analysis.)

Planning Estimates - Expenditure estimates for thenext biennium (FY 004-05 during the FY 2002-03biennium) that includes an estimate amount of inflationin the expenditures.

Price of Government, “POG” - M.S. 16A.102 requiresthe Governor and the Legislature to establish revenuetargets that prescribe total revenues for state and localgovernments in terms of the percent of total Minnesotapersonal income they represent. The price of governmentstatistic is an indicator of the capacity of the stateeconomy to support government. The target is expressedas a ratio, the numerator of which is state and localgovernment tax- and non-tax revenues, and thedenominator of which is aggregate Minnesota personalincome. (See personal income.)



Real (Constant) Dollars - The value of money afteradjusting for inflation (vs. nominal, or current value —the price without adjusting for inflationary effects).

Reciprocity - A mutual action, exchange or agreement,usually between two states, such as mutual recognitionof residency for purposes of income tax liability,eligibility for resident tuition and the like.

RFP, Request for Proposal - A process used to solicitproposals from interested parties for specific agencyinitiatives. The RFP contains detailed information aboutthe proposals being sought including potential fundingavailable and required time lines. The process involvesthe submittal of detailed applications by interestedparties.

Revenue - Government revenue is money received by agovernment from external sources net of refunds andother correcting transactions, other than from theissuance of debt, liquidation of investments, and asagency and probate trust transactions. Governmentrevenue excludes non-cash transactions such as receiptof services, commodities or other receipts in kind.Government revenue includes intergovernmentalrevenue. —Source: Dictionary of U.S. GovernmentStatistical Terms, ibid.

Revenue Estimate - Official fiscal analysis prepared byan executive branch agency, forecasting the revenue lossor gain from the enactment of proposed tax legislation.Usually, revenue estimates are prepared by the ResearchDivision of the Department of Revenue. The revenueestimate does not identify the costs a state agency orlocal government may incur to implement the proposedchange; a fiscal note is required to obtain thatinformation.

Revolving Fund - Funds established in law in whichrevenue (including loan payments) is credited back tothe fund for the same use as the original appropriation.

Special Funds - A grouping of revenues from certainsources from which certain expenditures are made. Thestate of Minnesota has a general fund and a variety ofspecial funds. Revenues for these funds are usually

dedicated and expenditures from the special funds areusually restricted for certain purposes. Examples ofspecial funds include the Highway User Tax DistributionFund, Trunk Highway Fund, the Environmental Fund,Natural Resources Fund, the Game and Fish Fund, theHealth Care Access Fund, the State Government SpecialRevenue Fund and the Special Revenue Fund.

Special Revenue Fund - See Special Funds, above.

Spending Plan - Developed by state agencies after thelegislative appropriation process is completed. The plansmust specify the purpose and amount required for eachactivity and must be ?within the amount and purpose ofthe appropriation.” State law (M.S. 16A.14, subdivision3) requires that agency spending plans must be approvedby the Department of Finance before any money is spent.

Standing or Statutory appropriations - When languagein statute authorizes ongoing payment out of the treasuryfor a program. In contrast to direct appropriations,statutory appropriations need not be renewed everybiennium for funding to continue.

State Aids - Defined in statute as “programs by whichthe government provides financial assistance to politicalsubdivisions to assist them in delivering public services,financing public facilities or reducing property taxes inconnection with state mandates, programs andprocedures.”

State Government Special Revenue Fund - See SpecialFunds, above.

Structural Balance - Applying the balanced budgetrequirement to a biennium beyond the one for whichappropriations are being enacted.

Tail - (1) The future budget effects of anyappropriation or revenue provision; or, (2) anappropriation, funding formula, or tax expenditure thattakes effect in, or carries forward to a future biennium,at higher future costs/ revenue losses to the statetreasury than in the initial biennial budget period.

Targets - In the legislative process, specific limits onspending and revenues, assigned by the House Ways and



Means Committee, to reconcile the fiscal actions ofcommittees and divisions with the Budget Resolution.The targets add up to the total limit on expenditures,revenues and the reserve level established in the BudgetResolution. The Senate has a less formal process forestablishing spending and revenue limits.

Transfers - M.S. 16A.285 allows agencies to transferoperations money between programs within the samefund. Agencies must notify the Commissioner of Financeof the transfer. A transfer must be consistent withlegislative intent and must be reported by the FinanceDepartment to the chairs of the House Ways and MeansCommittee and the Senate Finance Committees.Agencies may transfer funds within programs, withoutnotifying the Legislature, unless language in statute orlaw prohibits a specific transfer.

Unallotment - Statute allows the Commissioner ofFinance, with the approval of the Governor and afterconsulting with the Legislative Advisory Commission, toreduce unspent allotments if a deficit would otherwiseoccur (M.S. 16A.152, Subd. 4). The commissioner maydo so only after the Reserve account is used to balanceexpenditures and revenues.

Veto - The State Constitution allows the Governorto veto a bill or to veto one or more items ofappropriation in a bill while approving the rest of thebill (line-item veto). If the Governor signs a bill thatcontains vetoed provisions, a statement of the itemsvetoed must be attached to the signed bill. If theLegislature is in session, the Governor must transit thebill to the house where it originated and the vetoed itemsmay be reconsidered separately.

Zero Based Budgeting (ZBB) - A budgeting practicethat examines the total budget for a program or agency,not just changes from the base or previous level budget.In strict ZBB, the budget base would be zero. Inpractice, ZBB often means that a budget starting pointis some amount less than 100 percent of what wouldhave been the base.

Capital Investment Terms, Page 8

Capital Investment

Arbitrage - The financial gain that can be garnered byselling tax-exempt bonds and reinvesting the bondproceeds at a higher, taxable, interest rate. For example,if the principal of a 8 percent bond is invested at 10percent, the 2 percent profit that results is the arbitragegain. Arbitrage is regulated and limited by federal taxlaw.

Bond - A written promise to pay a specific sum ofmoney (the principal) at a date or dates in the future(the maturity) together with periodic interest at aspecified rate.

Bonding - Authorization to provide for issuance of debtinstruments, as well as the use of money raised throughthe issuance for capital projects.

Bond Rating - Rating for bonds to be issued thatprimarily reflects the ability of the issuer to repay thebonds. Better bond ratings result in lower interest ratesfor the bonds issued. Bond ratings are better when thestate follows its self-imposed debt managementguidelines. Current bond rates for the State are AAA byMoody’s, AA+ by Standard and Poor’s, and AAA byFitch.

Call option - A stipulation in a bond contract thatallows the issuer to buy back the bonds at a specifieddate. A call option gives the issuer flexibility to lowercosts if interest rates drop by issuing bonds at a lowerrate to “call” or buy back bonds that are paying a higherrate of interest. Call options typically are set at ten yearson Minnesota’s 20 year bonds. (See also refinance)

Capital Iceberg - See deferred maintenance.

Capital Projects Funds - three funds used to pay forcapital projects. The General Projects Fund pays forcapital projects from with General Fund money. TheBond Proceeds fund pays for non-transportation capitalprojects from the proceeds of a bond sale. TheTransportation fund uses bond proceeds to pay fortransportation related capital projects.

CAPRA - Capital Asset Preservation and RenewalAccount - Bond funds allocated to state agencies forthe purpose of restoring or maintaining buildings andother items of a capital nature. (See also, HEAPRA.)

Construction - The phase of a building project followingpredesign and design. It usually accounts for more than91 percent of the spending on a project, and is theimplementation of the predesign and design stagedecisions.

Debt Management Guidelines - Guidelines that theState imposes on itself to control its capital investment.Following the guidelines will generally result in a betterbond rating for the state, and thus, lower interest ratesfor state borrowing. The guidelines include: (1) totalannual debt service cannot exceed 3 percent of annualnon-dedicated receipts; (2) total debt cannot exceed 2percent of total State personal income; (3) State agencydebt cannot exceed 3.5 percent of State personalincome; and, (4) general obligation debt, moralobligation debt, bond guarantees, equipment capitalleases and real estate leases cannot exceed 5 percent ofState personal income.

Debt Capacity - The ability of the state to sell additionalbonds to pay for bonding projects. Debt capacity is basedon the amount of money available to pay off the bondswhich is based on a limit of approximately 3 percent ofthe state’s General Fund expenditures.

Debt Service - Money appropriated to pay the interestand principal on the money borrowed by the state for itscapital projects.

Defeasance - To set aside money in an escrow accountthat is sufficient to retire outstanding bonds. By settingaside funds to retire debt before the call date on thebonds, the bonds are in effect “taken off the books.”

Deferred Maintenance - Backlog or catch-upmaintenance of state buildings. The Department ofAdministration estimates that the state currently has$1.5 billion in deferred maintenance needs.


Capital Investment Terms, Page 9

Design - The second phase of a project, beforeconstruction, after predesign. Design usually is less than8 percent of the total budget of a project, and consists of3 phases: schematic design, design development andconstruction documents. The bulk of the spendingduring a project during the design phase is forarchitectural and engineering programming.

Design-Build - A way to build capital projects that mayoffer cost savings over traditional design-bid-buildmethods on some projects. This method allows design toproceed along with construction as apposed to having acomplete design first, and then bidding different parts ofthe project. One criticism of design-build is that itusually requires one of the major constructioncontractors to build a large projects and can squeeze outsome of the smaller contracting companies.

General Obligation Bonds, “GO Bonds” - Bondsthat the state stands behind with its taxing powers.

HEAPR - Higher Education Asset Preservation andRenewal Account. Bond funds allocated to the highereducation systems for the purpose of restoring ormaintaining buildings and other items of a capitalnature. (See also CAPRA.)

Planned Maintenance - Preventative maintenance ofa corrective and planned nature to repair and preventbuilding problems.

Predesign - First stage of a building project. Usuallyaccounts for less than 1 percent of total project spending.This stage is intended to determine a project’s feasibility,define the essential aspects of the project and prepareinstructions for the design phase. The predesigndocuments should include the rationale for the project,its use components, costs and scheduled cash flow. Inaddition, predesign should address possible operatingbudget implications of the project.

Refinance - Similar to home owners who refinancetheir home loans during periods of low interest rates, thestate can issue bonds at a lower rate to pay off bonds

issued earlier at a higher rate. However, the older bondscan not be repurchased until their call date, the earliestdate that bond holders have been told the bonds wouldbe refinanced, has been reached.

Revenue Bonds - Bonds for which the debt service ispaid by a specific revenue stream, and not out of theGeneral Fund. Revenue bonds are primarily issued bythe Minnesota Housing Finance Agency, which makeshome loans with the bond funds, for example, and usesthe mortgage repayments of those loans to service itsdebt, and the University of Minnesota and theMinnesota State College and Universities system, whichmight issue bonds for the purpose of building a parkinglot or dorm, and service those bonds with lot fees, ordorm rents.

Jobs & Economic Development Terms, Page 10

Jobs and Economic Development

Brownfields - Parcels of land that were used forindustrial or manufacturing purposes in the past, butnow are underutilized or have been abandoned. In manycases, soil under brownfields have been contaminatedwith pollutants. Redevelopment of brownfields is oftendifficult, because of the costs associated with cleaning upthe pollutants although all brownfields are notnecessarily contaminated.

DES - Acronym for the Minnesota Department ofEconomic Security. DES assists in increasing theeconomic independence of Minnesotans, concentratingon unemployed individuals and those that face specialbarriers to entering and staying in the workforce.

DPS - Acronym for the Minnesota Department ofPublic Service. DPS is currently only the weights andmeasures division. The agency’s energy, information andoperations management, telecommunication, andtelecommunications access for communications impairedpersons division were transferred to the Department ofCommerce by Governor’s executive order in 1999.

DTED - Acronym for the Minnesota Department ofTrade and Economic Development. DTED assists increating an economic environment that produces netnew job growth greater than the national average andincreases both non-resident and resident tourism withinthe state.

Dislocated Worker Program - The federal and statedislocated worker programs serve those dislocated fromlong held jobs because of factors such as technologicalchanges, investment decisions, and changes inconsumption and competition. Services provided toclients fit into three broad categories: readjustment,retraining and supportive services. This program isfunded by an employer tax, which is deposited into theWorkforce Development Fund. The program wastransferred to the Department of Trade an EconomicDevelopment by the 1999 Legislature.

EDA - Acronym for Economic DevelopmentAuthority.

HRA - Acronym for Housing and RedevelopmentAuthority.

IRRRB - Acronym for the Iron Range Resources andRehabilitation Board. The IRRRB is designed to helpstrengthen and diversify the economy of northeasternMinnesota. The IRRRB is funded predominately fromtaconite production taxes that are levied against miningcompanies in lieu of property taxes.

MHS - Acronym for the Minnesota HistoricalSociety.

Minnesota Investment Fund - Formerly the EconomicRecovery Fund. The purpose of the MinnesotaInvestment Fund is to create and retain jobs with a focuson industrial manufacturing and technology relatedindustries. The Department of Trade and EconomicDevelopment awards grants to local units of governmentthat, in turn, make loans to assist new or expandingbusinesses. Loans to businesses can be for land, buildings,equipment and training. Funds may also be used forinfrastructure improvements necessary to supportbusinesses located or intending to locate in Minnesota.

Minnesota Jobs Skills Partnership Program (JSP) - Atraining program operated by the Department of Tradeand Economic Development. JSP provides training fornew jobs or provides skills training in order to retainexisting employees.

Minnesota Workforce Center System - A servicedelivery system that provides a full array of employmentand training services in one location. This system’sapproach to service delivery avoids duplication ofservices and presents a structure for assuring a bettermatch between workers and jobs. This system is a stateand local partnership comprised of the MinnesotaDepartment of Economic Security and seventeen



Workforce Service Areas. Primary partners include JobService/Reemployment Insurance and Veteransprograms, Rehabilitation Services, State Services for theBlind, local Workforce Councils/Private IndustryCouncils and local elected officials who work with theJob Training Partnership Act, Dislocated Worker andOlder Worker Programs. This multi-partnered systemalso includes county governments, post-secondary andsecondary education, county social service agencies,community action agencies, Displaced Homemakerprograms and other locally-based service providers. TheWorkforce Center System is funded through acompetitive grant from the United States Department ofLabor. As of January 1998, Minnesota established 35Workforce Centers throughout the state and expects toopen a total of 55 sites by July 1998.

PUC - Acronym for the Public Utilities Commission.The PUC creates and maintains a regulatoryenvironment that ensures safe, reliable and efficientelectric, natural gas and telephone services as a quasi-judicial/quasi-legislative board.

UI - Acronym for Unemployment Insurance,previously known as Reemployment Insurance. UI is ashort-term program administered by the Department ofEconomic Security that provides temporary income toindividuals looking for new jobs or awaiting recall totheir regular jobs. The benefits for this program comefrom taxes employers pay into the UnemploymentInsurance Fund. No deductions are taken from anyworker’s wages to pay for these benefits. (See Taxes,FUTA.)

WCRA, Workers’ Compensation ReinsuranceAssociation - A nonprofit association of all insurancecarriers that carry workers’ compensation insurance.WCRA is responsible for: establishing procedures underwhich claims are made and for reviewing claims;collecting data regarding liabilities against the insurers;and calculating and charging members premiumssufficient to cover expected liabilities that members willincur.

Workers’ Compensation Special Fund - Used to fundMinnesota’s workers’ compensation system, includingadministrative costs for the Department of Labor andIndustry, the Office of Administrative Hearings and theWorkers’ Compensation Court of Appeals. The fundalso provides benefits to injured workers whoseemployers do not have mandatory workers’compensations coverage and enforces mandatoryworker’s compensation insurance coverage. The fundconsists of assessments made against worker’scompensation insurers and self-insured employers on thebasis of their payments to injured workers for wages lostas a result of injuries.

Housing Terms and Acronyms

Amortization - Repayment of a mortgage loan byinstallments. Repayment installments include both theprincipal and interest of the loan.

ARIF, Affordable Rental Investment Program - AMinnesota Housing Finance Agency (MHFA) programthat provides zero percent interest-deferred loans for theproduction and rehabilitation of low and moderateincome rental housing.

Bridges Rental Assistance - A Minnesota HousingFinance Agency program that provides temporary rentalhousing payment assistance on behalf of an income-eligible participant until a permanent housing subsidybecomes available.

CDBG, Community Development Block Grant - Afederal entitlement program first authorized in 1974 andadministered by the Department of Housing and UrbanDevelopment (HUD). Local governments automaticallyreceive a portion of these funds and participate in eitherthe entitlement program or the states and small citiesprogram. Grant amounts are determined by a formulabased on the community’s populations, populationgrowth lag, the number of persons in poverty, the extentof overcrowded housing and the amount of housing builtprior to 1940. These funds are for improving



communities by providing decent housing and suitableliving environment, and expanding economicopportunities, principally for persons with low andmoderate incomes.

Consolidated Plan - Developed by the Department ofHousing and Urban Development (HUD) in 1994 tojoin together application and submission requirementsfor the community development block grant program(CDBG), the HOME Investment Partnerships program(HOME), Emergency Shelter Grants (ESG) and HousingOpportunities for Persons with AIDS (HOPWA).

CRF, Community Rehabilitation Fund - A MinnesotaHousing Finance Agency program that provides grantsto cities and non profit agencies for the preservation orimprovement of designated neighborhoods or areas. ACRF grant may be used for single-family construction,acquisition, rehabilitation, demolition, permanentfinancing, and refinancing.

Equity - The difference between the fair market valueof the property and the amount still owed on itsmortgage. Equity Take-Out Loans - Minnesota Housing FinanceAgency (MHFA) loans offered as an incentive to keepowners of federal assisted properties from prepaying theirmortgage and discontinuing participation in federalaffordable housing program. Equity take-out loans arefrequently used for rehabilitation of rental housingproperty. The agency may make equity take-out loanson all federally assisted properties including propertieswhere the agency does not hold the first mortgage.

FMR, Fair Market Rent - An amount determined byHUD to be a fair amount on which to base its subsidycontribution. The amount determined by HUD to befair is derived from a survey of privately-owned , safe,non-luxury rental units to find out what it costs to rentin the area. The FMR is set as a percentile of rentsreported in the survey. Currently, the 40th percentilerepresents FMR. This percentile is used to figure outhow much to reimburse private property owners whorent to families or individuals with Section 8.

Fannie Mae - A congressionally chartered, shareholder-owned corporation that supplies mortgage funds tohome buyers and investors.

FHA mortgage - a mortgage that is insured by theFederal Housing Administration (FHA).

FHA - Acronym for Federal Housing Administration

Freddie Mac - A congressionally chartered,shareholder-owned corporation that supplies mortgagefunds to home buyers and investors.

Gap Financing - The difference between the cost ofproducing or rehabilitating a building and the appraisedvalue upon completion. When the cost of producing orrehabilitating a building is higher than the appraisedvalue upon completion, gap financing assistance isprovided in the form of grants or loans to help mitigatethe difference.

Housing Development Fund - A revolving fundunder the control and jurisdiction of the MinnesotaHousing Finance Agency (MHFA). Moneys depositedinto the revolving fund include: (1) moneysappropriated and made available by the state for thepurposes of the fund, (2) moneys which MHFA receivesin repayment of advances made from the fund, (3) othermoneys which may be made available to MHFA forpurposes of the fund from any other source or sources,(4) all fees and charges collected by MHFA, and (4) allinterest income or other income not required by theprovisions of a resolution or indenture securing notes orbonds to be paid into another special fund. M.S.462A.20

HRA - Acronym for the Housing and RedevelopmentAuthority.

HUD - Acronym for the Department of Housing andUrban Development.

MHFA - Acronym for Minnesota Housing FinanceAgency



PHA, Public Housing Agency - Cities with publichousing will have a public housing agency to manage andoperate the building. Public housing is usually federally-built and locally-owned.

Neighborhood Land Trust - A neighborhood landtrust must have as one of its purposes the holding of landand the leasing of land for the purpose of preserving theaffordability of housing on that land for persons andfamilies of low and moderate income. MN. Stat.462A.31

RHS, Rural Housing Service - An agency withinthe U.S. Department of Agriculture, which operatesunder the Consolidated Farm and Rural DevelopmentAct of 1921 and Title V of the Housing Act of 1949,that provides financing to farmers and other qualifiedborrowers buying property in rural areas who are unableto obtain loans elsewhere.

Right of First Refusal - A provision in an agreementthat requires the owner of a property to give anotherparty the first opportunity to purchase or lease theproperty before he or she offers it for sale or lease toothers.

Section 236 - A federal insurance interest reductionprogram which subsidizes interest rates for owners ofhousing developments in exchange for restricting rentlevels to a certain level of affordability for low andmoderate income renters. The term of the mortgage isbetween 30-40 years and owners have the option toprepay the remaining balance of the mortgage at anytime after 20 years of affordable rents have beenprovided.

Section 8 - A federal rental assistance program thatallows participants to pay 30 percent of their income forrent and the remainder of the rent is subsidized by theSection 8 program.

Family & Early Childhood Terms, Page 14

Family and Early ChildhoodNote: Additional terms and acronyms relevant to family and early childhood fiscal policy may be found in the Education, Healthand Human Services, Housing and Taxes sections.

90/10 Split - Most state aid formulas are appropriated at90 percent of the estimated entitlement during the fiscalyear of the entitlement. The final (10 percent) paymentmust be the amount of the actual aid entitlement, afteradjustments for final data, minus the payments madeduring the fiscal year of the entitlement. With the finalpayment being based on actual data, rather than theestimated entitlement, it may be greater, less than orequal to 10 percent.

ABE - Adult Basic Education.

At-Home Infant Care (AHIC)- A family eligible toreceive assistance under the Basic Sliding Fee child careprogram may also be eligible for At Home Infant CareAssistance. A family in which a parent provides care forthe family’s infant child may receive a subsidy in lieu ofassistance if the family is eligible for, or receivingassistance under the basic sliding fee program. A familyis limited to 12 months of assistance. The maximumreimbursement rate to the participating AHIC family isequal to 75 percent of the rate established in theapplicant’s county of residence.

Basic Population Aid - A funding component of theAdult Basic Education state aid formula. For eachSchool district, basic population aid is equal to $1.80multiplied by the greater of 1) the population of theschool district according to the most recent censusestimate or; 2) 4,000.

Basic Sliding Fee Child Care - A state subsidized childcare assistance program for low-income families notenrolled in TANF/ MFIP Child Care assistance.Funding for this program is capped and allocated tocounties on a calendar year cycle. Counties are requiredto contribute a fixed minimum direct service match andin many cases choose to contribute additional countyfunds.

Basic Sliding Fee Uninterrupted Child Care - Fundsdesignated to provide uninterrupted child care assistancefor families completing their transition year from theMFIP program. These funds assure that familiescompleting their transition year will have a slot on theBasic Sliding Fee Child Care program and will notencounter a waiting list.

CAP, Community Action Program - A communityaction program is a community based and operatedprogram that provides a range of services and activitieshaving a major impact on the causes of poverty in thecommunity. Operated by community action agencies,community action programs are also designed to achieveincreased self sufficiency and greater participation in theaffairs of the community.

CCA, Community Action Agency - A communityaction agency is a political subdivision of the state, acombination of political subdivisions, a public agency, ora private non profit agency that receives funds to supportcommunity action programs.

CCDF, Child Care Development Fund - A five-yearfederal block grant for child care. The CCDF has threecomponents: discretionary, mandatory, and matchingfunds. Each component has separate requirements andMinnesota must comply with each component annuallythrough federal FY 2002 in order to leverage availablefederal block grant funding. This five year block grantwill be up for federal re-authorization by Congress afterfederal FY 2002.

Child Care Regional Resource & Referral Agencies -Regional organizations that work with existingcommunity based committees such as the interagencyearly intervention committees or neighborhood groupsto advocate for child care needs in the community aswell as serve as important local resources for childrenand families



Child Care Wraparound - A full day of child care usinga combination of state and federal Head Start and childcare assistance funding.

Child Care Fund - Funds designated to help lowincome families pay for child care so that parents maypursue employment or education and training leading toemployment. The Child Care Fund is composed of StateGeneral Fund appropriation and federal Child Care andDevelopment Fund (CCDF) monies.

CSBG, Community Services Block Grant - A federalblock grant, under P.L. 97-35, that supports theinfrastructure of community action agencies. Communityaction agency programs were established to help fightpoverty by providing low-income Minnesota citizenswith self sufficiency skills and training.

Early Childhood Health and DevelopmentalScreening - Minnesota school districts are required tooffer health and developmental screening for four-year-old children. The state provides $40 per child asreimbursement for health and developmental screeningfor children between the ages of 3.5 to 5 years old.

Educational Excess and Deficiency Transfer - At theend of a fiscal year, any excess general fundappropriations to the Department of Children, Families,& Learning for an aid or grant program specified in M.S.127A.41 (subd. 9) may be transferred to programs thathad deficiencies and could not sufficiently fund itsformula. There are K-12 and Family and EarlyChildhood Education programs eligible for transfers toprograms with excesses and deficiencies. Excessappropriations within the K-12 programs may not betransferred to deficient Family and Early ChildhoodEducation programs or vice versa. This transfer of excessfunds is sometimes referred to as the “commissioner’sreserve.”

Family Service Collaborative (FSC) - The FamilyService Collaborative program assists local communitiesto work with children and families, by creating a clientcentered integrated local service delivery system forchildren and their families, that coordinates serviceacross agencies. Each collaborative must consist of a at

least one school district, one county, one public healthentity, and one community action agency.

GED Test Reimbursement - Provides 60 percentreimbursement to eligible individuals for completing thefull battery of General Education Development tests.

IDA, Individual Development Accounts - A federalinitiative that enables low-income families to build assetsand save money for economic self sufficiency. Use ofsavings accrued in IDA’s is limited to post secondaryeducation related expenses and training, businessdevelopment and home ownership. In Minnesota, thefamily assets for independence initiative is modeled afterthat the federal IDA initiative.

Part C - An interagency effort between the MinnesotaDepartment of Children, Families and Learning and theMinnesota Department of Human Services. Thisprogram provides eligible young children, withdisabilities, age birth to 2, and their families withinteragency services in their local communitiesdeveloped through an individual family service plan(IFSP) process.

Portability Pool - Up to 5 percent of the annualappropriation for Basic Sliding Fee (BSF) may beearmarked for continuous child care assistance to eligiblefamilies who move between Minnesota counties. Underthe portability pool, the family must have been in BasicSliding Fee child care, moved to a county with a waitinglist, and apply for BSF within 30 days. The receivingcounty must accept responsibility after two months,continue basic sliding fee for the lesser of six months oruntil the family is under the regular county basic slidingfee program.

Proration - To distribute funding proportionately basedon the amount of funding available. For example, allproviders receive 98.6 percent of the amount they wouldbe entitled to under the funding formula.

School Age Care - Districts with a communityeducation program may offer a School Age Care program



for children in kindergarten through grade 6 for thepurposes of expanding learning opportunities. Districtsare eligible for school age care revenue for the additionalcost of providing services to children with disabilities orto children experiencing family or related problems of atemporary nature.

Sliding Fee Scale - A family’s monthly parent fee forbasic sliding fee child care services. Parent fees areestablished in rule and must provide for graduatedmovement to full payment. The minimum parent feesfor families between 75 percent and 100 percent ofpoverty level must be $5 per month.

Temporary Assistance for Needy Family (TANF)/Minnesota Family Investment Program (MFIP) ChildCare - TANF/MFIP Child Care helps cash assistancefamilies and families moving off of cash assistance(Transition Year Families) pay for child care whileparticipating in authorized activities. Families who areemployed or pursuing employment, or are participatingin employment and training activities authorized in anapproved employment services plan, or employedfamilies who are in their transition year are eligible toreceive cash assistance. MFIP Child Care is available asa forecasted program without an allocation ceiling.Counties are reimbursed, from state and federal funds,for 100% of their expenditures.

Transition Year Child Care - Transition year child careis available for up to one year for families who havereceived cash assistance for at least three of the last sixmonths before losing eligibility due to increased hours ofemployment, increased income or child or spousalsupport, or the loss of income disregards due to timelimitations.

K-12 Finance Terms, Page 17

K - 12 Education Finance

ANTC, Adjusted Net Tax Capacity - The propertyvalue used for assessing most school taxes. ANTCadjusts for differences in assessment practices andreflects the application of the classification rates to themarket value of property.

AP/IB, Advanced Placement/InternationalBaccalaureate - Programs that require more rigorousstudent achievement than regular programs and oftenwill count for college credit.

Basic Skills Test - Tests in math, reading and writingtaken by Minnesota students, passage of which isrequired in order to graduate. See also Profile of Learning

Compensatory revenue - A portion of generaleducation revenue based on the number of students in aschool district that qualify for free and reduced-pricelunches.

CFL or DCFL - The Department of Children, Families,and Learning (formerly the Department of Education).

Educational Excess & Deficiency Transfer - At theend of a fiscal year, any excess general fundappropriations to the Department of Children, Families,& Learning for an aid or grant program specified in M.S.124.14 (subd. 7 - 7a) may be transferred to programsthat had deficiencies and could not sufficiently fund itsformula. Excesses in K-12 programs can only be appliedto deficiencies in K-12 programs, and excesses in EarlyChildhood and Family Education Programs can only beapplied to deficiencies in Early Childhood and FamilyEducation programs. In the Early Childhood area, thistransfer of excess funds is sometimes referred to as the“commissioner’s reserve.”

Enrollment Options “Open Enrollment” - Theprogram that allows students to attend a school districtother than the one in which they reside.

Formula Allowance - Usually refers to the basicgeneral education formula allowance. For example,$3,964 per pupil unit in 2000 - 01.

General education allowance - The funding formulathat provides school districts with a majority of theirrevenue. For example, the general education formulaallowance for the 2000-01 school year is $3,964 per pupilunit. A district’s formula revenue is made up of a localproperty tax levy share and a state aid share.

General Education Program - The funding for schooldistricts which is the primary source of revenue for theirgeneral fund. The General Education Program includesthe General Education Formula Allowance, but alsoincludes other types of formula-generated revenue: BasicSkills, Sparsity, Operating Capital, Training andExperience, Transportation Sparsity, ReferendumAdjustment, Equity, Transition and Supplemental.

HSGI, High School Graduation Incentives - Agroup of alternative education programs designed toencourage students to complete graduationrequirements.

IEP, Individual Education Plan - The learning planrequired to be developed for each student withdisabilities.

LEP, Limited English Proficient - The term appliedto students who have limited English speaking ability.

Market Value - The value assigned to property by anassessor. The market value is intended to reflect the salesvalue of the property.

Marginal Cost Pupil Units - Used to indicate pupilcount. In school districts with declining studentenrollment from one year to the next, the districtsMarginal Cost Pupil Unit count is 77 percent of its


K-12 Finance Terms, Page 18

current year pupil count, plus 23 percent of its prior yearpupil count.

MARRS, Minnesota Automated Reporting StudentSystem - An automated process for school districts toreport pupil data to the state. This data is used forfunding calculations and other purposes.

Profile of Learning - In-depth content requirementsMinnesota students must meet, in a wide variety ofsubjects, in order to graduate. See also Basic Skills Test.

PSEO, Post Secondary Enrollment Options. (SeeHigher Education terms.)

Pupil Units - A weighted count of pupils used todetermine revenue in many formulas:

One Kindergarten Pupil = .557 pupil unitsOne Elementary Pupil (grade 1-3) = 1.115pupil unitsOne Elementary Pupil (grade 4-6) = 1.06 pupil unitsOne Secondary Pupil (grade 7-12) = 1.3 pupil units

Review & Comment - A process by which thecommissioner of Children, Families and Learningeducation reviews and comments on the feasibility andpracticality of school district building projects.

Sparsity revenue - The portion of the generaleducation formula that provides additional revenue toschool districts for schools that have relatively smallenrollments and are relatively far from other schoolbuildings.

T&E, Training and Experience revenue - A portionof the general education formula that compensatesschool district for a portion of the training or educationlevels and experience (number of years of service) levelsof school district staff. Began phasing out in the 1998-99school year.

Tax Capacity Rate - The rate of taxation for a specificprogram. Tax capacity rates are expressed as a percent ofthe adjusted net tax capacity. Many tax capacity ratesare set in law.

UFARS, Uniform Financial Accounting andReporting Standards - A statewide accountingprocedure that must be used by school districts to recordfinancial transactions and report financial informationto the State Department of Education.

Youth Works and AmeriCorps - The state and federalprograms that provide learning opportunities forstudents in conjunction with providing services to theircommunities.

Higher Education Terms, Page 19

Higher Education

Allocation Model - Proposed MnSCU methodologyfor internal distribution of state appropriations tocampuses.

Board of Trustees of the Minnesota State Collegesand Universities - Also known as the Higher EducationBoard (HEB), or “the Merger Board.” Newly created(1991) board that has governance authority over theState Universities, Community Colleges and TechnicalColleges after the formal merging of these three systemson July 1, 1995. Members of the Board of Trustees areappointed by the governor.

Board of Regents - Board which has governanceauthority over the University of Minnesota. Themembers of the Board of Regents are elected by bothhouses of the legislature meeting in joint convention.

Design for Shared Responsibility - Defines howstate financial aid is allocated to Minnesotaundergraduate students. This policy distributes theresponsibility for paying the cost of attending collegeamong the student, the student’s family, and the stateand federal governments. Shared Responsibility expectsthe student to finance 50 percent of the cost; the familyis expected to pay the other half. In general, grant aidfrom the federal and/or state government applies to thefamily share and loans or workSstudy apply to thestudent share.

EdVest - College savings program enacted by the1997 Legislature. Allows families to set up statemanaged, tax deferred, savings accounts for educationalexpenses. Contributions are matched by the state up toa maximum $300 annual benefit. Families with incomesunder $50,000 receive a 15% match, families withincomes between $50,000 and $80,000 receive a 5%match. The program is still in the set-up phase andaccounts will not be available until 2001.

FAFSA, Free Application For Federal Financial Aid- Federal form that provides financial information tocomplete the Federal Needs Analysis (see below) whenapplying for financial aid. Submitting this completedform with a copy of current tax information is aprerequisite for all state and federal need based aid.

Federal Needs Analysis - Federal Methodology Usedto assess a student eligibility for both state and federalneed based financial aid programs. Financialinformation about the student and/or family and thestudent’s cost of attendance are used to determine thestudents financial need.

Funding Formula - Method by which the Legislaturedetermines system allocations. Minnesota is in theprocess of converting from a formula that was known as“Average Cost Funding,” which based funding on the fullaverage cost per student and was entirely dependent onenrollment volume. The new formula is being called a“fixed and variable” cost model which recognizes that aportion of the cost of running a college does not varygreatly with minor differences in enrollment.

FYE - Full Year Equivalents. A measure of enrollmentequating total creditSbased enrollment (including fulland part time students) to the equivalent number of fulltime students. Calculated by taking total credit hoursgenerated and dividing by 45.

Gopher State Bonds - Program which will offer Stategeneral obligation bonds issued in small denominationsto help families save for college. These bonds are stateand federally tax exempt. Bonds are not yet availablebut should be late in 1998.

Headcount - Total number of students regardless oftheir enrollment status (number of individuals).

HEFA Higher Education Facilities Authority -Statutory entity which assists (primarily private) collegeswith financing of capitol projects. The Authority isempowered to issue revenue bonds which in aggregate do



not exceed $500 million. The Authority does notreceive an funding from the state.

HESO Higher Education Services Office, formerly theHigher Education Coordinating Board) - State agencythat is responsible for administering state financial aidprograms and collecting statewide data on enrollmentsand aid distribution.

Instructional Expenditure - Includes both direct (e.g.faculty salaries) and indirect costs (e.g. heat) assignableto academic programs.

Legislative Intent Tuition - Estimate of revenuescollected by the higher education systems attributable tothe student (tuition) portion of the formula (see UniformCost Related Tuition). Because system boards haveauthority in statute to set their own tuition rates, therevenue they collect may vary some from the tuitionassumptions made by the funding formula and thelegislature. The difference (if positive) is sometimesreferred to as excess tuition.

NonSSinstructional Expenditure - Includes fundingfor activities such as research, athletics, financial aid,and community service. NonSinstructional activities, asa percentage of total state appropriations, vary greatly bysystem and mission.

PELL Grant Program - Main Federal need basedfinancial aid program. Grants range from $400 to $3000annually and apply to undergraduate studies only.

Perkins Loan - Major supplemental federal loanprogram. Provides long term, low interest loans toundergraduate and graduate students. Students mustshow need (see Federal Needs Analysis). Undergraduatesmay borrow $3,000 annually up to $15,000 in total,graduates may borrow $5,000 annually up to $30,000 intotal.

PSEO Postsecondary Enrollment Options - Stateprogram that allows high school juniors and seniors toenroll in postsecondary courses. These students are

accepted on a space available basis and are funded atmarginal (32 percent) cost in the higher educationfunding formula.

Reciprocity - Agreements that Minnesota has withother states and provinces that allow students to attendcolleges in those areas at lower than nonresident costand vice versa. The agreements vary by state as to scopeand cost, but most include a provision for equalizationpayments between states based on enrollment volume.

SELF Loan, Student Educational Loan Fund - Staterun revolving loan fund. Loans are not need based butrequire a credit worthy co-signer (usually a parent).Interest on SELF loans is not deferred but must be paidquarterly while the student is in school. Undergraduatesmay borrow $4,500 annually for the first two years and$6,000 annually thereafter up to $25,000 in total.Graduates may borrow $9,000 annually up to $40,000total.

Series EE U.S. Savings Bonds - Federally issued savingsbonds. Bonds are available in small denominations andpurchase methods such as payroll deduction areavailable. Interest on EE bonds is state and federal taxexempt when used for educational purposes.

Stafford Loan Program - Federal loan program thatincludes both need based, subsidized loans and non-needbased, unsubsidized loans for undergraduate, graduateand professional students. Both programs are traditionalcollege loan programs handled through private lenders,however, since 1994, both programs are also available atcertain schools as Federal Direct Student Loans wherethe U.S. Department of Education is the lender. Annualloan amounts and aggregate limits vary by year in schooland dependancy status.

State Spending - Equals appropriations plus tuition.Tuition money is not appropriated, but is treated asdedicated revenue that is retained by the highereducation systems. Because Minnesota links tuition andstate funding levels (see Uniform Cost Related Tuition),the higher education funding bill appropriates the stateshare of costs, but also sets an expectation for overallstate spending (see Legislative Intent Tuition).



State Grant Program - Main state need based financialaid program. This program works in conjunction withthe federal PELL program to provide grants to studentswith assessed need (see Federal Needs Assessment andDesign for Shared Responsibility). After the amount oftotal grant aid that a student is eligible for is determinedany PELL grant which a student will receive is deductedand the remainder is the amount of the State Grant.

Uniform Cost Related Tuition - Relates the price ofpublic higher education (tuition) to the cost of providinginstruction. The state is expected to fund twoSthirds ofthe cost of instruction (slightly more at the TechnicalColleges) and students are expected to pay oneSthird.

Environment & Ag Terms, Page 22

Environment and Natural Resources, & Agriculture

AURI - Acronym for the Agricultural UtilizationResearch Institute.

BOWSR - Acronym for Board of Water and SoilResources.

Consolidated Conservation (Con-Con) Lands -State-owned lands that Minnesota received in exchangefor paying off ditch bonds issued by seven Minnesotacounties in the early 1930s. According to state law,these lands are to be used for "conservation purposes"and managed by the DNR.

Conservation Reserve Enhancement Program (CREP)The CREP program allows Minnesota to match federaldollars to put conservation easements on up to 100,000acres in the Minnesota River valley. The federalgovernment will provide up to $163 million toMinnesota for CREP; Minnesota must provide matchingfunds of $70 million and must allocate them beforeSeptember 2002.

DNR - Acronym for the Minnesota Department ofNatural Resources.

Ecosystem-Based Management (DNR) - TheMinnesota DNR defines Ecosystem-based Managementas the collaborative process of sustaining the integrity ofecosystems through partnerships and interdisciplinaryteamwork. The long-term goal is sustainability ofMinnesota's ecosystems, the people who live in them,and the economies founded on them.

Environmental Fund - Fund in the state treasury thataccounts for activities that monitor and controlenvironmental problems using taxes and fees fromactivities and industries contributing to environmentalproblems.

Environment and Natural Resources ExpendableTrust Fund - Fund in the state treasury that receivesthe investment earnings and a portion of the net lotteryproceeds deposited in the Environment and NaturalResources Non-expendable Trust Fund to be expendedin for natural resources purposes.

Ethanol Producer Payments - MDA - Provides a20-cent ethanol producer payment which providessecurity required by lenders to invest in ethanol facilities.Goals of the program include: C building a new market for the state's corn crop.C developing corn processing/ethanol production

facilities in Minnesota. C replacing 10% of imported petroleum we use for

gasoline. ($100 million annual savings) C helping the Twin City Area meet U.S. EPA

standards for carbon monoxide.

Feedlot and Manure Management AdvisoryCommittee (FMMAC) - FMMAC was created duringthe 1994 legislative session as an advisory body to theMDA and PCA. The committee was established to,"identify needs, goals, and suggest policies for research,monitoring, and regulatory activities regarding feedlotand manure management."

Game and Fish Fund - Fund in the state treasurythat receives revenues from license fees and fines relatedto hunting and fishing that are spent for relatedpurposes.

Integrated Pest Management (IPM) Program- MDA- The IPM Program develops and implements statewidestrategies for the increased use of IPM on private andstate managed lands.

Legislative Commission on Minnesota Resource(LCMR) - The commission consists of 18 legislatorsselected to serve by their respective body of the



legislature. The commission recommends a biennialbudget plan for the expenditure of the Environment andNatural Resources Trust Fund and Minnesota FutureResource Fund dollars.

Lottery-In-Lieu-of Tax - DNR - 2000 Sessionlegislation directs 6.5 percent in-lieu sales tax on lotterytickets directly to "natural resources programs." The tax,which amounts to roughly $25 million in FY01 and $22million in FY02 and thereafter, previously went to thestate general fund.

MDA - Acronym for the Minnesota Department ofAgriculture.

Minnesota Future Resources Fund - Fund in the statetreasury that receives a portion of the cigarette andtobacco taxes that are appropriated for various naturalresource development purposes.

Natural Resources Funds - Fund in the statetreasury that receives taxes from fuel used in recreationalvehicles, fees and donations that are used to fundmanagement of the related natural resource programs.

OEA - Acronym for the Minnesota Office ofEnvironmental Assistance.

PCA - Acronym for the Minnesota Pollution ControlAgency.

Petroleum Tank Cleanup Fund - Fund in the statetreasury that receives funding from a fee imposed onpetroleum distributors for the purpose of reimbursingresponsible parties for most of their costs to cleanupenvironmental contamination from petroleum tanks.

Reinvest In Minnesota (RIM) - RIM isMinnesota’s premier conservation program, designed toprotect, restore and improve the natural resourcehabitat.

Rural Finance Authority (RFA) - Loan programsoffered by the Department of Agriculture are located in

this division. The Rural Finance Authority offers avariety of loan programs.

Scientific and Natural Area (SNA) - DNR preservesnatural features and rare resources of exceptionalscientific and educational value through landacquisition. These areas are open to the public fornature observation and education.

Select Committee on Recycling and the Environment(SCORE) - OEA - In 1989, the Minnesota Legislatureadopted comprehensive waste reduction and recyclinglegislation based on the recommendations of theSCORE. This set of laws, commonly referred to asSCORE, is a part of Minnesota's Waste ManagementAct (WMA). The SCORE legislation has providedcounties with a funding source to develop effective wastereduction, recycling and solid waste managementprograms. The SCORE Report is an annual examinationof Minnesota programs and data.

Solid Waste Fund - Fund established in the statetreasury of monies credited to the account. Funding isfrom the solid waste fees and the proceeds of bond sales.The fund is used for costs associated with the closedlandfill cleanup program or other costs as appropriatedby law.

Solid Waste Investment Fund - Fund established in thestate treasury of monies credited to the account.$5 million is transferred from the Solid Waste Fund overfour years starting in FY2000. Transfers into andinvestment earned is to be used for future state liabilityto clean landfills.

Sustainable Communities - OEA - Sustainablecommunities meet the needs of the present withoutcompromising the ability of future generations to meettheir own needs. The OEA Sustainable CommunitiesTeam promotes sustainable development activities at thecommunity level.

Total Maximum Daily Loads (TMDL)- PCA- Thefederal Clean Water Act requires states to adopt waterquality standards (TMDL) to protect the nation’s waters.TMDLs define how much of a pollutant can be in a


surface and/or ground water while still allowing it tomeet its designated uses.

Wildlife Management Area (WMA) - DNR ownsand operates 1,300 public wildlife areas which providerecreation for hundreds of thousands of upland,waterfowl, and deer hunters each year. 1.1 million acresof habitat provide for most of Minnesota’s game andnongame wildlife species.

Health & Human Services Terms, Page 25

Health and Human Services1115 Medicaid Waiver - This notation refers to section1115 of the Social Security Act that grants the U.S.Department Health and Human Services the authorityto waive certain Medicaid laws to allow states flexibilityin designing their Medicaid programs; these waivers arealso known as research and demonstration waivers.Minnesota pursued and received a waiver as part of theMinnesotaCare program, allowing the state to reduceexpenditure growth, include both short- and long-termcare in managed care delivery systems, eliminate barriersto health care access, and coordinate and integrate thedelivery of services to those with special needs.

1915 (c) Waivers - Section 1915 (c) of the SocialSecurity Act refers to authority that allows the HealthCare Financing Administration (HCFA) to waive federalMedicaid requirements to allow states to experimentwith providing health care services in home andcommunity-based settings as opposed to institutionalsettings (e.g., hospitals, nursing homes). These waiverservices, often referred to as home and community-basedwaivers, include day treatment, habilitation, supportedemployment, respite care, semi-independent livingservices, and adaptive equipment. Waivers may alsoallow reimbursement for services not usually covered byMedicaid but are provided to help an individual stay outof an institution.

Home and community-based waiver categories are: < CAC, Community Alternative for Children/

Community Alternative Care - This waiver paysfor health care of individuals who requires thelevel of care of a hospital due to chronic illness.

< CADI, Community Alternatives for DisabledIndividuals - CADI pays for health care ofindividuals who require the level of care of anursing facility.

< DD, Developmental Disabilities (see alsoMR/RC (Mental Retardation or RelatedConditions) - The DD waiver pays for healthcare for individuals requiring 24-hour plan ofcare and need the level of services provided inan ICF/MR.

< EW, Elderly Waiver - The EW programprovides a customized package of health care for

individuals over 65 years of age who need thelevel of services provided by nursing facilities.

< MR/RC, Mental Retardation or RelatedConditions (see DD above).

< TBIW, Traumatic Brain Injury Waiver - TheTBI waiver pays for health care for personsdiagnosed with Traumatic Brain Injuries whoneed nursing or facility or neuro-behavioralhospital level of care.

60-month time-limit - The number of months that anindividual may receive assistance from the federal TANFblock grant in a lifetime.

AC, Alternative Care - A general fund program thatpays for home and community-based services for elderlyindividuals who qualify for nursing home placement,cannot afford 180 days of nursing home care, choose tobe served in the community, and no resources exist topay for the community services.

ADL, Activities of Daily Living - A reference to anindex measuring a patient’s degree of independence inbathing, dressing, using the toilet, cooking, eating, andmoving about. The index is used to determine the levelof care needed in a nursing home or other residentialfacility. Payment rates for some services are based onADL’s.

Adoption Assistance - This program, operated by theDepartment of Human Services, provides cash assistanceto families who adopt children with special needs (asdefined by the state) who are under state guardianship.

AFDC, Aid to Families with Dependent Children - Acash grant for very low income families when one parentwas absent, incapacitated, or unemployed. The federalgovernment ended the program and replaced it with thefederal Temporary Assistance to Needy Families(TANF) block grant program. Minnesota’s TANFprogram is called MFIP.

APS, Alternative Payment System (also called thecontract payment system) - The more recent of two



reimbursement methodologies used to pay for nursingfacility services under the MA program.

Capitation - A method of payment for health servicesin which an individual or institutional provider is paid afixed amount for each person served, without regard tothe actual number or nature of services provided in a setperiod of time. HMOs characteristically use this paymentmethod.

Carve out - An arrangement whereby specific servicesare eliminated from health insurance coverage under acapitated rate. The carved-out services may then beobtained on a fee-for-service basis.

Case Management - The planning, referral, monitoring,and coordination of services provided to clients withcomplex needs and services.

CCDTF, Consolidated Chemical DependencyTreatment Fund - A fund that combines revenues fromMA, General Assistance (GA), Regional TreatmentCenters (RTC), and state and federal grants into oneaccount that pays for CD treatment. Counties are givenan allocation from which to pay for CD treatment oftheir residents.

CD, Chemical Dependency - related to frequent orrepetitive use of alcohol or other drugs which adverselyaffects the health, interpersonal relationships,employment, or safety of the user or others.

CHB, Community Health Board - A local board ofhealth established for better coordination of local healthneeds. CHBs must have jurisdiction over a minimumpopulation and geographical area.

CHIPS, Children in Need of Protective Services - aminor child whom a court has found to be in need ofprotection or services because the child has beenabandoned, abused, neglected or who meets one of theother criteria specified in M.S. section 260.015, subd. 2a.

CHS, Community Health Services Act - legislationpassed in 1976 to provide state subsidies to localgovernment to perform core public health functions.

CISN, Community Integrated Service Network - aformal arrangement of physicians, hospitals, and otherhealth care providers that provide a continuum ofprepaid health services to a defined population of nomore than 50,000 enrollees, including residents of otherstates.

Community Rating - A method of calculating healthplan premiums using the average cost of actual oranticipated health services for all enrollees within aspecific area. Variances for different groupcharacteristics such as age or sex are not allowed.

County-Based Purchasing - An option that allowscounties to assume the responsibility for purchasinghealth services for recipients eligible for PMAP.

CPI-U, Consumer Price Index-All Items (UnitedStates City Average) - An inflation adjustment indexoften used in rate-setting for human services programs.

CSE - acronym for Child Support Enforcement.

CSSA, Community Social Services Act - M.S. 256Especifies a planning process for the provision of socialservices administered by the boards of countycommissioners under the supervision of theCommissioner of Human Services. The Legislature alsoprovides a block grant to counties to assist in carryingout these services; this block grant is combined with thefederal social services block grant (Title XX) to providean important source of funding for counties.

CTC, Child and Teen Check-ups - Minnesota’sversion of the Early and Periodic Screening, Diagnosis,and Treatment (EPSDT) program, which is mandated byfederal Medicaid laws. CTC is a comprehensive healthprogram for infants and children under age 21. Theprogram is designed to identify potentially handicappingconditions, diagnose and treat specific medicalconditions, and encourage the development of goodhealth habits.

DAC, Development Achievement Centers, seeDT&H.



DD, Developmentally Disabled - People diagnosedwith mental retardation or a related condition (MR/RC)who have substantial functional limitations or deficits inadaptive behavior and who manifest these conditionsbefore their twenty-second birthday.

DHS - acronym for the Minnesota Department ofHuman Services.

DME, Durable Medical Equipment - Prescribedmedical equipment (e.g., wheelchair, hospital bed,respirator) that can be used for an extended period oftime.

DRG, Diagnosis-related Group - Classification ofprocedures used to sort hospital patients by dischargediagnosis into categories that are medically similar andhave approximately equivalent lengths of stay. DRGsare used in determining MA and GAMC payment levels.

DT&H, Day Training and Habilitation (formerlyknown as DACs) - Out-of-home, non-residentialprogram services provided for six or moredevelopmentally disabled individuals for part of a 24-hour day.

EA, Emergency Assistance - A program thatprovides cash assistance to help families respond to acrisis that could result in risking the health and safety ofthe children if immediate aid is not provided. Thisassistance is available once a year. This program wasformerly known as AFDC-EA.

Earned income disregard - The percentage of an MFIPrecipient’s monthly income that is excluded for purposesof calculating the recipient’s grant amount.

EBT, Electronic Benefits Transfer - An automatedsystem that permits public assistance recipients to accesscash benefits and food stamps through the use of a cardsimilar to an ATM or debit card.

EGA, Emergency General Assistance - Moneyprovided to eligible persons with a crisis situation thatcould result in severe hardship except for the provisionof Emergency Assistance. Applicants must be eligible forGA.

ENABL, Education Now and Babies Later - Aprogram designed to reduce adolescent pregnancy(targeted to teens aged 12-14) through prevention,community health promotion approach to educating,and supporting adolescents in the decision to postponesexual involvement.

Enhanced PMAP - A term used to describe the greateror “enhanced” role of county boards in the transition toPMAP in respective counties.

EPSDT, Early and Periodic Screening, Diagnosis, andTreatment, see Child and Teen Checkups.

ERISA, Employee Retirement Income Security Act -A 1974 federal law that preempts state regulation of self-funded health benefit plans.

ESL, English as a Second Language - Training servicesto help non-English speaking persons communicate inEnglish.

Experience Rating - A method of adjusting health planpremiums based on their historical utilization data andthe distinguishing characteristics of a specific subscribergroup.

FAE, Fetal Alcohol Effect - A controversial termused to describe a child who has been effected by alcoholbut may not have all of the characteristics of FAS.

FAS, Fetal Alcohol Syndrome - A medical diagnosisdescribing children who have been exposed to alcoholduring fetal growth, characterized by a) decreased heightand weight, b) unique facial features, and c) damage tothe brain and nervous system.

Family wage level - A higher threshold (110 percent ofthe transitional standard) that is used to calculate anMFIP recipient’s grant amount when income is earned.It is higher to encourage work participation.

Fee-for-service - A method of purchasing health careservices under which a physician or other practitionercharges separately for each patient encounter or servicerendered, as opposed to the capitated method ofpayment.



FFP, Federal Financial Participation - Federal monies,matched by state and sometimes local monies, used toprovide services to eligible individuals in federallyauthorized programs (e.g., AFDC and MA).

FMAP, Federal Medical Assistance Participation -The federal share of payments for eligible MA services.The share is also applied to AFDC and foster caremaintenance reimbursements. The FMAP rate is basedon a formula driven by each state’s per capita incomeand ranges from 50 - 83 percent. For example,Minnesota is generally at 51 - 52 percent whileMississippi is approximately 80 percent.

FPG, Federal Poverty Guidelines - An index ofpoverty in the United States that is updated annually;the measure forms the basis of eligibility for a number ofmeans-tested programs.

Food Stamps - Benefits issued through paper couponsor electronic means used to purchase food and foodproducts in approved stores. The food stamp program isadministered by the U.S.D.A. at the federal level and bycounty social services agencies at the local level.

FSET, Food Stamp Employment and TrainingProgram - A federally-mandated program that providesemployment and training services for able-bodied foodstamp recipients between the ages of 18 and 55.

GA, General Assistance - A state programproviding financial assistance to eligible people who areunable to provide for themselves. The grant for a singleadult living independently is $203/month.

GAMC, General Assistance Medical Care - A state-funded health care program that primarily serves low-income Minnesotans aged 21 to 64 who are ineligible forother state and federal health care programs.

Gatekeeper - The primary care practitioner in managedcare organizations who determines whether a patientneeds to see a specialist or needs other non-routineservices. The goal is to guide the patient to appropriateservices while avoiding unnecessary and costly referralsto specialists.

GRH, Group Residential Housing - A system of ratesand payments that provides for the room and boardexpenses for people who are aged, blind, and disabled(over 18 years of age), or categorically eligible for GA,who reside in a group residential housing setting.

HCAF, Health Care Access Fund - Comprised ofprovider taxes and enrollee premiums, this fund is thesource of payments to providers of Minnesota Careservices, administration of the MinnesotaCare programs,and activities related to health care access.

HCFA, Health Care Financing Administration - Thefederal agency that administers the federal Medicaid andMedicare programs, which are part of the U.S.Department of Health and Human Services.

HHS, the U.S. Department of Health and HumanServices.

HMO, Health Maintenance Organization - Anorganization that provides an agreed upon set of basicand supplemental health maintenance and treatmentservices to enrolled group members in a geographic areafor a predetermined fixed price.

Housing with Services (HWS) - A facility providingsleeping accommodations to one or more adult residents(primarily over 55 years of age), and offering orproviding regularly scheduled health-related orsupportive services for a fee. This designation does notinclude nursing facilities, hospitals, boarding care homes,supervised living facilities, battered women’s shelters,family foster homes, and setting licensed under DHSrules 34, 35, 36, or 18.

HUD, the U.S. Department of Housing and UrbanDevelopment.

ICF/MR, Intermediate Care Facility [for theMentally Retarded]. A facility licensed by theDepartment of Human Services to provide health orrehabilitative services for mentally retarded individualsor persons with related conditions who require activetreatment but not the level provided in a hospital ornursing home.



IHP, Individual Habilitation Plan - A detailed plandeveloped by the county case manager for peoplereceiving services for MR/RC, which lists short-termobjectives related to the client’s annual and long-termgoals and the methods for achieving the objectives.

IMD, Institutions for Mental Diseases - A hospital,nursing facility, or other institution of more than 16beds, that is primarily engaged in providing diagnosis,treatment, or care of persons aged 18-65 years withmental diseases, including medical attention, nursingcare, and other services. IMD’s are not eligible for MAfunding.

Indemnity - Health insurance benefits provided in theform of cash payments rather than services. Anindemnity insurance contract usually defines themaximum amounts that will be paid for covered services.

INS, the U.S. Immigration and Naturalization Service.

IPP, Individual Program Plan - A detailed plan by theservice provider specifying methods to reach the shortand long term goals of the ISP.

ISP, Individual Service Plan - A plan developed by thecounty case manager for a person receiving services forMR/RC. Developed prior to the IHP, it includesassessments, diagnosis, needed services, an annual andlong-term goals for the client.

ITP, Individual Treatment Plan - A plan ofintervention, treatment, and services for a person withmental illness developed by a service provider under theclinical supervision of mental health professional on thebasis of a diagnostic assessment. The plan identifiesgoals and objectives of treatment, treatment strategy, aschedule for accomplishing the goals and the individualresponsible for providing treatment to the person.

LTC, Long Term Care - A term that generally refersto facilities for persons who are elderly, physicallyhandicapped, or developmentally disabled and expectedto need care for an extensive period of time. Thefacilities provide a range of medical and supportiveservices, most of which are paid for by MA.

MA, Medical Assistance - MA is a federal/state-funded, state-operated and administered program thatprovides medical benefits for certain low-incomeindividuals. MA is Minnesota’s version of the federalMedicaid program.

MAXIS - A computer system that tracks and makespayments for public assistance benefits for AFDC, MA,GA, Food Stamps, and MSA.

MCHA, Minnesota Comprehensive HealthAssociation - A state operated insurance program forpeople whose health coverage was either denied orterminated because of severe or chronic illness. It isfunded by an assessment on all non-ERISA insuranceplans.

MDH - Acronym for Minnesota Department of Health.

MERC, Medical Education and Research Costs - Apool of funds used to supplement medical education andresearch activities supported by diminishing patient carerevenues in an increasingly competitive health caremarket.

METO, Minnesota Extended Treatment Options - Aprogram that provides secure treatment beds for peoplewith mental retardation who exhibit severe behaviorswhich present a risk to public safety. The programprovides specialized residential services on theCambridge campus and an array of community supportservices statewide.

MFIP, Minnesota Family Investment Plan - This pilotprogram, which ended on June 30, 1998, is the modelused to develop MFIP, replacing the old AFDC program.

MFIP, Minnesota Family Investment Program - Aprogram that redesigned public assistance byconsolidating benefits (former AFDC, former FamilyGeneral Assistance, and Food Stamps) by streamliningrequirements and providing incentives for recipients towork, remain employed, and move off public assistance.MFIP replaces the AFDC program, the Family GeneralAssistance program, and the MFIP pilot program. Theprogram took effect on January 1, 1998.



MMIS II, Medicaid Management Information System- The information system that processes providerinvoices, edits for recipient and service eligibility, paysallowed charges, and provides recipient’s paymenthistory.

MI, Mental Illness - All forms of illness in whichpsychological, emotional, or behavioral disturbances arethe dominating feature. MI often seriously limits aperson’s capacity to function in primary aspects of dailyliving such as relationships, living arrangements, work,and recreation. The term is relative and variable indifferent cultures, schools of thought, and definitions. MOE, Maintenance of effort - A specified amount ofmoney the state (or county) is required to spend in orderto continue receiving funding from the federal (or state)government. It is designed to assure that the state (orcounty) does not reduce its level of commitment to aprogram when additional funds become available fromother sources.

MR, Mentally Retarded (see Developmentally Disabled(DD).

MSA, Minnesota Supplemental Assistance - A stateprogram that provides financial assistance to elderly,blind, and disabled recipients of SSI. In some cases, theassistance is a supplemental cash grant; in others, it is inthe form of payment to a provider of residential serviceswhere the recipient lives.

MSHO, Minnesota Senior Health Options - Ademonstration project within PMAP that integrates,under combined Medicare and MA capitation payments,the purchase of health care for seniors age 65 or olderwho are eligible for Medicare and MA. Enrollees areeligible to receive services under PMAP and Parts A andB of the Medicare program.

NF, Nursing Facility or Skilled Nursing Facility -A nursing home, certified by the State Department ofHealth, which must meet MA and Medicare providerrequirements related to service, staffing, and safety.

PA, Prior Authorization - The review and

authorization of MA and GAMC payment for certainrestricted services, prior to the services being provided.

PAS, Pre-admission Screening - A program thatscreens all applicants to Medicaid-certified nursingfacilities and boarding care facilities prior to admission.The program is designed to reduce or delay nursingfacility placements by assessing the health care needs ofapplicants and residents of nursing facilities and offeringcost-effective, community-based alternatives appropriatefor the person’s needs.

PCA, Personal Care Assistant - A person who assistssick or disabled individuals in their home with tasks ofdaily living (cooking, bathing, shopping).

PMAP, Prepaid Medical Assistance Program - Analternative to the fee-for-service (see FFS) method ofpurchasing health care for public assistance clients(families and children, elderly public assistance);prepayment to the health plans contracting with thestate to provide all the health care services required bylaw for eligible persons.

PPO, Preferred Provider Organization - A formallyorganized entity usually consisting of hospitals andphysician providers. PPOs provide health care servicesto purchasers usually based on discounted rates in returnfor expedited claims processing and a predictable volumeof the health care market.

PPS, Prospective Payment System - A paymentsystem, usually associated with Medicare, in whichpayments are paid under a fixed fee schedule and are notretroactively settled based on actual costs incurred.

Premium tax - A one percent tax imposed on the grosspremium receipts of health insurance companies. Thetax is currently not being collected, but will be reimposedat one percent on January 1, 2003.

Prescription drug program - A state-funded programthat provides prescription drug coverage for low-incomeseniors age 65 or older with limited assets. Disabledindividuals will be eligible for the program at a lowerincome level beginning July 1, 2002.

PRISM, Providing Resources to Improve Support in



Minnesota - The automated statewide child supportsystem.

Provider tax - A 2.0 percent tax imposed on theproviders of health care services for payments receivedfor such services. The tax, reduced to 1.5 percentthrough calendar year 2002, is the primary source offunding for the MinnesotaCare program.

PRWORA, Personal Responsibility and WorkOpportunity Reconciliation Act - the federal WelfareReform Act of 1996, Public Law Number 104-193.

QI, Qualified Individual - An elderly personentitled to Medicare Part A (Hospital Insurance), whoseincome is greater than 120% of FPG but less than 175%of FPG, and whose assets are below two times the SSIasset limit. Subject to available funding, this neweligibility category will pay all of the Part B (MedicalInsurance) premiums for Medicare recipients whoseincome is greater than 120% of FPG but less than 135%of FPG and/or part of the Part B premiums if income isgreater than 135% of FPG but less than 175% of FPG.

QMB, Qualified Medicare Beneficiary - An elderlyperson entitled to Medicare Part A, whose income is ator below 100% of FPG, and whose assets are below twotimes the SSI asset limit. This category of eligibilityallows MA to pay the out-of-pocket Medicare costs of arecipient (e.g., coinsurance, deductibles) and themonthly Part B premiums ($43.80/month in 1998) forMedicare recipients. QMBs, SLMBs, and QIs are oftenreferred to as “dual-eligibles” since they are eligible forboth MA and Medicare.

RTC, Regional Treatment Center - Stateresidential institutions that provide 24-hour care andtreatment for people with mental illnesses, chemicaldependencies, traumatic brain injuries, sexualpsychopathic personalities, and behavioral problems whoare elderly. Formerly known as state hospitals.

Rule 50 - The cost-based, rate-setting payment systemused to reimburse nursing facilities for MA. The otherrate-setting methodology is the Alternative PaymentSystem.

SCHIP - see Title XXI.

SCHSAC, State Community Health ServicesAdvisory Committee - This entity is responsible forproviding advice and counsel to the Commissioner ofHealth on issues related to the development, fundingand evaluation of community health services.

Senior Drug Program - see Prescription Drug Program.

SILS, Semi-Independent Living Services - Servicesprovided to adult with developmental disabilities that aredesigned to allow the individuals served to maintain andimprove their capability to live in the community.Services include training and assistance in managingmoney, preparing meals, shopping, and maintainingpersonal care.

SLMB, Specified Low-income Medicare Beneficiary - An elderly person entitled to Medicare Part A, whoseincome is greater than 100% of FPG but less than 120%of FPG, and whose assets are below two times the SSIasset limit. This category of eligibility allows MA to paythe monthly Part B premiums for Medicare recipients.

The (federal) Social Security Act provides a variety offunding and program Titles:< Title I - Grants to States for Old-Age

Assistance for the Aged.< Title IV - A - Temporary Assistance for Needy

Families (TANF) block grant.< Title IV - B - child welfare services and funding

in the form of a block grant. < Title IV - D - Child Support.< Title IV - E - foster care, training, and related

case management requirements and funding.Also pays for out-of-home placement costs foreligible children.

< Title V - Maternal and Child Health ServicesBlock Grant.

< Title X - Grants to States for Aid to the Blind.< Title XI - Demonstration Grants - used to

fund demonstration projects to prove thefeasibility of a social services program or servicebefore it is fully funded.

< Title XIV - Grants to States for Aid to thePermanently and Totally Disabled.



< Title XVI-A - Grants to States for to the Aged,Blind, or Disabled.

< Title XVI-B - Supplemental Security Incomefor the Aged, Blind, and Disabled.

< Title XVIII - Medicare, provides payment ofneeded medical care for persons age 65 andolder.

< Title XIX - Medical Assistance Program.< Title XX - Grants to States for Social Services.

Also referred to as the Social Services BlockGrant or SSBG.

< Title XXI - State Children’s Health InsuranceProgram (SCHIP) is a new federal programincluded in the 1997 Balanced Budget Act thatprovides enhanced federal funding to states thatexpand health insurance coverage for children.

SOCS, State Operated Community-based Services -Program services provided to persons withdevelopmental disabilities that include but are notlimited to community group homes, foster care,supportive living services, day training and habilitation,respite care, and crisis services.

Spenddown - A process by which individuals with highlevels of out-of-pocket medical expenses and incomethat exceeds the Medical Assistance income standardcan qualify for medical benefits. In essence, individuals“spend down” their own income to the MA eligibilitystandard. An individual’s spend down amount is thedifference between the individual’s income and theincome level for the program.

SSIS, Social Services Information System - Apersonal computer-based information system indevelopment that will provide uniform access to dataand social services information.

SSI, Supplemental Security Income - A federal cashassistance program that provides monthly payments toeligible aged, blind, and disabled individuals with limitedincome and assets. Most SSI recipients are also eligiblefor food stamps and medical assistance.

STRIDE, Success Through Reaching IndividualDevelopment and Employment - Minnesota’s versionof the employment and training program for AFDCrecipients; the program ended January 1, 1998, when it

was replaced by the employment and training componentof MFIP.

Supplantation - The act of using federal dollars inplace of general fund monies.

TANF, Temporary Assistance for Needy Families- The federal program that replaced the AFDC programwhen it was eliminated and replaced with passage ofwelfare reform in 1996. Minnesota’s TANF program isknown as MFIP. It is funded jointly with federal TANFblock grant monies and state general fund monies.County dollars are also used to fund the TANF program.

TANF Reserve Account - An account in the U.S.Treasury that contains unobligated federal funds thatare to be used for MFIP-S or related initiatives.

TBI, Traumatic Brain Injury - Individuals withdeficits in adaptive behavior or substantial functionallimitations caused by injury to the brain.

TEFRA, Tax Equity and Fiscal Responsibility Act -The 1982 federal law that authorized MA eligibility forchildren with disabilities, regardless of their parents’income, to enable them to receive services in their ownhomes, instead of having to be institutionalized.

TPR, Termination of Parental Rights - The processunder M.S. section 260.221 by which a parent’s rights tohis or her child are legally ended. Parental rights must beterminated, before a child is available for adoption.

Tobacco Settlement (Annual Payments) - Ongoingpayments that are deposited into the state’s general fundas a result of the tobacco settlement agreement reachedin 1998. Estimated annual revenues to the general fundare $200.0 million.

Tobacco Settlement (Settlement Payments) - Six,one-time payments to the state totaling approximately$1.3 million as part of Minnesota’s Tobacco SettlementAgreement reached in 1998. Four of the first sixpayments to the state were dedicated to the TobaccoSettlement Fund amounting to an estimated $904million.



Tobacco Settlement Fund - An account in the statetreasury used to fund the Medical Education EndowmentFund and the Tobacco Use and Prevention and LocalPublic Health Endowment Fund. Of the amountsdeposited into the account, 39 percent is transferred tothe Medical Endowment Fund, and 61 percent to theTobacco Endowment Fund.

Tobacco Use Prevention and Local Public HealthEndowment Fund - A fund created in the statetreasury by the 1999 legislature to fund statewidetobacco prevention activities, local tobacco preventionefforts, and local public health.

Transitional standard - The basic level of assistance fora family on MFIP-S with no earned income. Theamount of assistance, which is made up of cash and foodassistance, varies by family size.

Uncompensated Care - Health care providedwithout payment from a patient or third-party payer.Includes charity care and care for people who areunwilling or unable to pay their bills.

USDA, U.S. Department of Agriculture - The federalagency responsible for the food stamp and WICprograms.

WIC, Women, Infants and Children - A programthat provides supplemental foods, nutritional counseling,and health screening for low-income, high-risk pregnant,breast-feeding, and post-partum women, infants, andchildren under the age of five. Federal funds and aninfant formula rebate comprise 95 percent of theprogram’s funding.

Work participation rate - The percentage of one-parent (45%) and two-parent (90%) families that mustbe engaged in “work activities” for 20 and 35hours/week, respectively, according to federal law inFFY2001.

Note: See Family and Early Childhood section for health andhuman services terms specific to those issues.

Judiciary Finance Terms, Page 34

Judiciary Finance

ACA - American Correctional Association.

BCA - Bureau of Criminal Apprehension.

Bed Impact - Change in the number of prison bedsbased on proposed legislation.

CCA Community Corrections Act - Thirty-onecounties participate in the CCA (“CCA counties”).They receive a subsidy from the state and are responsiblefor developing, implementing and evaluating bothtraditional and non-traditional local correctionsprograms. Each jurisdiction adopts an annual plan andsubmits it to the Department of Corrections.

CHIPS - Children in Need of Protection or Services.

CIP - Challenge Incarceration Program.

CJA - Criminal Justice Aid.

CRIMNET - An ongoing initiative to integrate local,state, and federal criminal justice information, so thatthis information is available to all appropriate criminaljustice personnel.

County Probation Officer Counties, “CPO Counties”- Thirty counties are under this designation. In thesecounties the juvenile and misdemeanant probationofficers are employees of the county. Each of thesecounties receives a subsidy from the state that pays up toone half of the salaries for these officers. Felonyprobation and supervised release cases in these countiesare handled by probation officers employed by the state.

Crime Victims Fund - This fund was authorized by theVictims of Crime Act. The money comes from criminalfines, forfeited bail bonds, penalty fees, and specialassessments collected by the U.S. Attorneys Offices, theU.S. Courts, and the Bureau of Prisons. The money isdistributed to States to fund victim assistance andcompensation programs.

Criminal Justice Aid - State aid to county governmentsthat is intended to reduce the reliance of county criminaljustice and corrections programs on property taxes.

CSTS - Court Services Tracking System (softwareprogram used by several counties for probation tracking)

DEM - Division of Emergency Management, this is aprogram in the Department of Public Safety.

DOC - acronym for Department of Corrections.

DPS - acronym for Minnesota Department of PublicSafety.

DWI - driving while intoxicated.

EJJ - Extended Juvenile Jurisdiction.

Fire State Aid - State payments to municipalities andindependent nonprofit firefighters’ relief associations fromproceeds of the Fire Marshall Tax on insurancepremiums. The aid applies to the employers’ contributionto firefighters’ pensions.

FVPSA - Family Violence Prevention and Services Act.

ICSP - Intensive Community Supervision Program.

MACCAC - Minnesota Association of CommunityCorrection Act Counties.

MACPO - Minnesota Association of County ProbationOfficers.

MCCCA - Minnesota Council of Child Caring Agencies.

MNCIS - Minnesota Court Information Systems.

Peace Officer State Aid, “Police State Aid” - Statepayments to counties and municipalities, theMetropolitan Airport Commission and independent


Judiciary Finance Terms, Page 35

nonprofit police and peace officers’ relief associationsfrom proceeds of a state surtax on auto insurance grosspremiums. The aid is applied to the employers’contribution to peace officers’ pensions.

Per Diem - As the term is used in corrections, the dailycost of housing an inmate.

POST - Board of Peace Officer Standards and Training.This board regulates the practice of law enforcement inMinnesota.

Probation - A court-ordered sanction placing certainconditions on a convicted offender, which could includesome local jail or workhouse time, but allowing theoffender to remain in the community under thesupervision of a probation officer.

PSI - Presentence Investigation.

State Contract Counties - In the remaining 26counties that are not CCA or CPO counties, the juvenileand misdemeanant probation officers are employees ofthe State Department of Corrections. The funding is justthe reverse of CPO Counties in that the counties pay thestate for up to one-half of the salaries of the officers.

State Criminal Alien Assistance Program - This is afederal program that assists states in fundingincarceration costs of inmates determined to be illegalaliens by the U. S. Immigration and NaturalizationService.

STS - Sentencing to Serve.

TCIS - Total Court Information System

Title IV-E - See definition in Health and HumanServices Section.

VAWA - Violence Against Women Act.

Violent Offender Incarceration - Truth in SentencingProgram. Federal program to help state and localgovernments expand their capacity to house violentoffenders.

VOCA - Victims of Crime Act.

State Government Terms, Page 36

State Government

AGO - acronym for the Attorney General’s Office.

AMPERS - Association of Minnesota PublicEducational Radio Stations. AMPERS representsindependently licensed, noncommercial radio stationsthat are not part of the Minnesota Public Radio (MPR)network. AMPERS stations receive some state grantfunds through the department of Administration.

CAAPB, Capitol Area Architectural PlanningBoard - responsible for architecture and comprehensiveland use planning in the Capitol area of St. Paul.CAAPB exercises zoning authority and controlsredevelopment of the north Capitol area.

Connecting Minnesota - a public/private partnershipwhich allows a private network developer limited accessto interstate rights-of-way. In return for this access, thedeveloper will install fiber-optic cabling along both stateinterstate and trunk highway rights-of-way. The projectis managed by the Departments of Transportation andAdministration.

DOER - acronym for Department of EmployeeRelations. DOER directs and coordinates personnelmanagement and labor relations programs for stateagencies.

EAP, Employee Assistance Program - providestraining, diagnostic, and referral services for stateemployees and their dependents. Located in thedepartment of employee relations.

EGS, Electronic Government Services - term used todescribe efforts to allow citizens to conduct governmentbusiness electronically. Examples include on-line licenseapplications, and electronic payments.

EQB, Environmental Quality Board - consists of fivecitizens and the heads of ten state agencies that play akey role in Minnesota’s environment. The boarddevelops policy, creates long-range plans and reviews

proposed projects that would significantly influenceMinnesota's environment. The EQB is a division ofMinnesota Planning.

Gambling Control Board - state agency thatregulates lawful gambling in Minnesota.

IA Warehouse - Information Access Warehouse. Astatewide data warehouse operated by the Department ofFinance. The IA warehouse integrates data from MAPS(the accounting and procurement system) and SEMA-4(the payroll and human resources system). Authorizedusers (including legislative staff) may access thewarehouse to compile data and generate reports.

Internal Service Fund - Funds internal to the operationof state government that provide a variety of services tostate agencies, such as computer services, motor pool,and printing. The funds must recover the full costs ofservices provided through billing back state agencies.

InterTech, InterTechnologies Group - the corecomputer operations organization for state agencies,i n c l u d i n g m a i n f r a m e o p e r a t i o n s a n dtelecommunications. InterTech is a division of theDepartment of Administration, and provides its servicesthrough the InterTechnologies revolving fund.

IPC, Information Policy Council - works with theOffice of Technology and the Department ofAdministration in developing the informationmanagement and operational direction for stategovernment. Comprised of representatives from stateagencies, IPC’s responsibilities include the initiation,review and approval of information managementpolicies.

LCC, Legislative Coordinating Commission -coordinates the administrative activities of the legislativecommissions, the Senate and the House ofRepresentatives. Six House members and six Senatemembers sit on the LCC.



LCPR, Legislative Commission on Pensions andRetirement (usually referred to as the PensionCommission) - provides legislative oversight forMinnesota's system of public employee pension plans byreviewing proposed public pension legislation,conducting research on pension policy issues andassessing the sufficiency of current public pension planfunding. Five House members and five Senate memberssit on the LCPR.

LMIC, Land Management Information Center, an officewithin MN Planning. LMIC assists local and stategovernments with geographic information technologyand data development.

MAD, Management Analysis Division - a fee forservice management consulting group within theDepartment of Administration.

MAPS, Minnesota Accounting and ProcurementSystem - information system used by all state agencies toenter and track accounting and procurementtransactions. MAPS is supported by the Department ofFinance, and is used in the preparation of statewidefinancial statements.

MASC - acronym for the Minnesota Amateur SportsCommission.

Master Lease - a lease-purchase option only available tothe Department of Administration. It is used to financepurchases with money from an internal service fund orto refinance equipment already purchased under amaster lease. Additionally, it may be used to financepurchases of capital equipment valued over $100,000with a useful life of more than ten years. The Legislaturedoes have authority to specifically authorize certainpurchases to be financed using a master lease as long asthe purchase is for major equipment with a capital valueof more than $10,000. This process reduces agencies’administrative work and significantly decreases interestrates paid by the agencies.

MCE, Minnesota Collections Enterprise - a division ofthe Department of Revenue, MCE is responsible for thestate’s debt collections activities.

MnASSIST - defined as the inter-agency supportorganization for the operation and maintenance of thestatewide administrative systems (see SAS).

MOCVS, Minnesota Office of Citizenship andVolunteer Services - a resource organization for peoplemanaging volunteer programs and citizen initiatives. MOCVS is housed in the Department ofAdministration.

Northstar - the state’s central web portal and on-lineinformation center, located on at www.state.mn.us.

OAH - acronym for the Office of AdministrativeHearings. OAH is an independent state agency chargedwith providing a fair, prompt and impartial hearingprocess for citizens who disagree with actions taken bygovernment. OAH judges hear cases in four areas:Administrative Procedure Act state agency contestedcases; rulemaking hearings; local government licensingand personnel cases; and Workers’ Compensationbenefit hearings.

OT, Minnesota Office of Technology - a bureau of theDepartment of Administration, OT is charged withproviding statewide leadership and direction forinformation and communication technology policy.

PEIP, Public Employees Insurance Program - astatewide program created in 1987 to provide localgovernments and other public employers with theadvantages of a large pool for purchasing medical, dentaland life insurance for their employees. The PEIP trustfund holds premium deposits received from employersparticipating in the plan.

Pension Systems: < DTRFA - Duluth Teachers Retirement Fund

Association.< IRAP - Individual Retirement Account Plan,

defined contribution plan primarily coveringmany recently hired state university, communitycollege, and technical college personnel.



< MERF - Minneapolis Employees RetirementFund, only applies to employees hired before July1, 1978.

< MSRS - Minnesota State Retirement System,administers various pension plans that coverstate employees. Includes the MSRS GeneralPlan for most executive branch employees, theMSRS Unclassified Plan for legislative staff andunclassified executive branch employees, theCorrectional Plan for employees in statecorrectional institutions that have sufficientinmate contact, the State Patrol Plan for statepeace officers, and legislators’ and constitutionalofficers’ plans.

< MTRFA - Minneapolis Teachers RetirementFund Association.

< PERA - Public Employees RetirementAssociation, administers pension plan thatcovers local, county, and school district non-teaching employees.

< PERA Police and Fire - provides coverage formany local police officers and paid firefighters.

< StPTRFA - St. Paul Teachers Retirement FundAssociation.

< TRA - Teachers Retirement Association,provides coverage for public school teachersthroughout the state, except for teachers in thefirst class cities, and some teachers incommunity colleges, state universities, andtechnical colleges.

Pension Terms:< Actuary - professional trained in mathematics,

statistics and economic techniques that allowthem to put a financial value on future events.The Pension Commission retains a consultingactuarial firm to perform the regular annualactuarial valuations of the various statewide andmajor local pension plans and to prepare costestimates for pending pension legislation.

< Actuarial Report - a study performed annuallyby the actuary to examine whether thecontributions made to a defined benefit plan arelikely to be adequate, given the benefits offered,the mortality and other demographic factors of

the membership and pension fund investmentperformance.

< Contribution Sufficiency / Deficiency - acomparison of required contributions tostatutory contributions indicating that currentcontribution rates are (are not) sufficient tocover expenses, normal cost, and necessarypayments to retire the unfunded accrued liabilityby the full funding date. Defined Benefit Plan -system providing an eventual pension benefitdetermined by a formula based on age, servicecredit and final salary. Most Minnesota publicpension plans are defined benefit plans.

< Defined Contribution Plan - system providinga pension benefit equal to the combinedemployee and employer benefits plus investmentearnings. No particular level of benefit isguaranteed. The MSRS unclassified plan is anexample of a defined contribution plan.

< Full Funding Date - the target date establishedfor paying off a plan’s unfunded accrued liability,usually June 30, 2020 for Minnesota publicpension plans.

< Normal Cost - the amount of money that mustbe contributed each year to pay for the benefitsthat members have earned that year. Normalcost is usually expressed as a percentage ofpayroll.

< Required Contributions - the level ofcontributions, usually expressed as a percentageof covered salary, determined by the actuary tobe necessary to fully fund a pension plan by thefull funding date.

< Statutory Contributions - contributions to bepaid to a defined benefit plan, generally specifiedin statute.

< Unfunded Accrued Liability - amount bywhich a fund’s estimated benefit obligationsexceed the assets projected to be available to paythose benefits.

Police State Aid - See “Judiciary Finance” section.



SAS, Statewide Administrative Systems (formerlycalled Statewide Systems Project) - the executivebranch’s statewide computerized business systems. Thesystem is comprised of MAPS (the state’s accountingand procurement system) and SEMA4 (the humanresources management system). Reporting capabilitiesare provided through the Information AccessWarehouse. The systems are administered by theDepartment of Finance.

SBI, State Board of Investment - constitutionallyestablished to invest all state funds. Invests pension fundassets of TRA, MSRS, and PERA. Members include thegovernor, the state auditor, the state treasurer, thesecretary of state, and the attorney general.

SEGIP, State Employees Group Insurance Program -provides Minnesota state employees (as well as peopleemployed by the University of Minnesota and otherquasi-state organizations) with employee/dependentgroup medical, dental and life insurance.

SEMA4, Statewide Employee Management System -the state’s human resources and payroll processingsystem.

State Information Infrastructure - provides voice, data,video, and other telecommunications transmissionservices to state agencies, educational institutions, publiccorporations; and state political subdivisions. Managedby the Commissioner of Administration through anaccount in the InterTechnologies revolving fund.

State Lottery Fund - fund containing all gross revenuesof the lottery, except those deposited in the State LotteryPrize Fund (see below). Lottery operating costs are paidfrom this fund, but may not exceed 15 percent of grossrevenues.

State Lottery Net Proceeds - the balance in the lotteryfund after transfers to the lottery prize fund and creditsto the lottery operations account. Of the net proceeds,40 percent must be credited to the Minnesotaenvironment and natural resources trust fund, and theremaining 60 percent must be credited to the CambridgeBank special revenue account.

State Lottery Prize Fund - separate prize accountfunded by lottery receipts. The lottery director mustdeposit an amount sufficient to pay lottery prizes. Anyprize money unclaimed after one year is also deposited inthe lottery prize fund.

Statewide Indirect Costs - all General Fundexpenditures made by a state agency to provide generalsupport services to any other state agency. Agenciesmust allocate these costs to programs supported by non-General Fund sources (usually federal or fee-basedprograms), and reimburse the General Fund with therecoveries. Indirect cost recoveries ensure that generaltax revenues do not pay a disproportionate share ofadministrative costs.

Tax Terms, Page 40

Tax Terms and Acronyms

Ad valorem Tax - A tax that is measured by value;that is, calculated based on the value of the asset, goodor transaction; for example the ad valorem property tax,the mortgage registration tax. Other types of taxesinclude those based on consumption (e.g., sales), volume(e.g., gas) and ability to pay (e.g., income).

AGI, Adjusted Gross Income - An intermediatefigure in the computation of individual income taxbetween gross income and taxable income. The startingpoint on the federal individual tax return for computingdeductions that are based on, or limited by, a percentageof income. Includes the sum of wages and salaries, tips,interest, dividends, rents, royalties, self-employmentincome, capital gains, unemployment compensation,alimony and the taxable portions of pension, annuity,and social security income minus selected deductions.(Those deductions include those for qualifying IRAcontributions, student loan interest, self-employmenthealth insurance, self-employment retirement plans, andmedical savings accounts.) Also referred to as FAGI,Federal Adjusted Gross Income.

Agricultural Education Credit - A state-paid propertytax credit for homesteaded and non-homesteadedagricultural land that is a statutory percentage of thegeneral education levy.

AMT, Alternative Minimum Tax - The tax laws givespecial treatment to some kinds of income and allowspecial deductions and credits for some kinds ofexpenses. Taxpayers who benefit from these laws mayhave to pay at least a minimum amount of tax throughan additional tax called the alternative minimum tax.

Apportionment of Income - A method by whichindividuals or businesses with income from multiplestates allocate that income between or among thosestates. For state corporate taxes, apportionment isgenerally based on a weighted average of the shares ofpayroll, property, and sales that occur in the state. InMinnesota, beginning in the 2001 tax year, the weightswill be 7.5 percent for property, 7.5 percent for payroll,and 85 percent for sales.

Assess - (1) Establish a value. (2) Impose a tax, charge,fee, fine, interest or penalty.

Assessment - (1) Appraisal or estimation of value,specifically the arms - length market value of taxable realor personal property. (2) The amount of tax imposed,particularly a tax for improvements that directly benefitthe property as in “a special assessment.”

Audit - Examination of tax returns, accounts orfinancial records to verify their correctness.

Basis - A taxpayer’s investment or interest in aproperty, used to determine the capital gain or loss fortax purposes from the sale or other disposition of theproperty.

Capital Equipment - For Minnesota Sales and Usetax, machinery and equipment used in this state by thepurchaser or lessee primarily for manufacturing,fabricating, mining or refining tangible personal propertyfor sale at retail, if that machinery and equipment isessential to the integrated production process. (For a fullstatutory definition, see M.S. 297A.01, subd. 16.)

Capital Gain or Loss - Net amount of income realizedor lost from the sale or exchange of property defined bylaw as a capital asset. Capital gains are generallyincluded in Adjusted Gross Income (AGI). Minnesotataxes capital gains at the same rate as other forms ofincome. The federal income tax generally taxes long-term capital gains (held over 1 year)at special (lower)rates. Note that capital gains from sale of a home (up to$250,000 single or $500,000 couple)are excluded fromAGI and are not taxed.

Charitable Contribution Deduction for Non-I-itemizers (Minnesota) - For income tax, allows thosenot claiming itemized deductions to deduct half of allcharitable deductions in excess of $500. Enacted in1999.

CRV, Certificate of Real Estate Value - A form thatis required to be filed (M.S. 272.115) with the county


Tax Terms, Page 41

auditor whenever real estate is sold for more than$1,000. The certificate, or “CRV” must show theproperty class and full price paid, or to be paid, includingany liens assumed and other information (such as thevalue of personal property conveyed with real property)that is necessary to determine the fair market value ofthe property. Information from CRV’s is used in thestate sales ratio study for purposes of property equalizationfor the state school aid formula and property taxassessment.

Child and Dependent Care Credit - An income taxcredit for expenses paid to someone who cares for ataxpayer’s child under age 13 - or for a spouse ordependent who is not capable of self-care, to enable thetaxpayer to work or look for work. The maximum creditis $720 per child for up to two children.< The Minnesota credit is a refundable credit, but

available only to those with total income(MAGICC) less than $31,690 (in 2000). Seealso Young Child Credit.

< The federal credit is not refundable, but has noincome limit on eligibility.

Child Tax Credit (Federal) - A partly-refundablefederal income tax credit of $500 per dependent childage 16 and younger, for parents with incomes in aqualifying range that varies by filing status. Firstavailable for tax year 1998.

“Circuit Breaker” - Direct state property tax relief toowners of residential and farm homestead property onthe basis of local property tax burden relative tohousehold income, in the manner that an electricalcircuit breaker relieves an overburden on a circuit. (SeeProperty Tax Refund.)

Class, or Property Classification - The Minnesotaproperty tax system imposes different property taxburdens on different types, or classifications, of property.For example, residential property, commercial industrialproperty, rental property, and seasonal recreationalproperty are separate classifications that are treateddifferently under the Minnesota property tax system. TheMinnesota State Constitution provides in Article X, Sec. 1that, “Taxes shall be uniform upon the same class ofsubjects ... .” For property equalization purposes, equal

assessment is measured among properties in the sameclass.

Class Rate - A state-determined rate that establishesthe relative property tax burdens among different classesof property.

“Class Rate Compression” - A narrowing of thedifference between state-determined class rates, therebyreducing the property tax burden for properties withhigher class rates relative to those with lower class rates.

Combined Receipts Tax - Applies at graduated ratesto gross receipts over $500,000 per year from a non-profit organization’s (gambling) sales of pull tabs andtipboards. Controlled Substances Tax (“Grass Tax”) - Anexcise tax imposed by weight or dosage unit. Applies tomarijuana and illegal controlled substances held,transported, possessed, transferred, sold or offered forsale in Minnesota. Corporation Franchise Tax - The state tax ondomestic and foreign (i.e. non - Minnesota based)corporations and financial institutions (including stateand national banks) that do business in Minnesota.Proceeds go to the general fund.

Contamination Tax - A property tax on thecontamination value of taxable real property (up to theestimated cost of a response plan), applicable to marketvalue reductions in effect during the taxable year.

CJA, Criminal Justice Aid— See Judiciary FinanceTerms.

Deduction - Any sum or amount subtracted, orallowed by law to be subtracted, from otherwise taxableincome. Includes amounts subtracted from adjustedgross income for documented, specific uses of money(itemized deductions), as well as fixed amounts varying byfiling status that filers may subtract in lieu of itemizeddeductions(standard deduction).

Deed Transfer Tax - A tax paid at the time of transferto the county treasurer by a person who grants, assigns,


Tax Terms, Page 42

transfers or conveys real estate. Proceeds go to thegeneral fund (97%) and county revenue fund (3%).

Dependent - A member of a taxpayer’s household(other than a spouse), whom the taxpayer supported andwho is a U.S. citizen or resident during the calendar year.

Depreciation - Tax purposes: Recovery through anincome tax deduction, spread over several years, of thecost of property used to produce income (such as rentalproperty or an automobile). Financial reporting: Theamount of expense charged against earnings by acompany to write off the cost of a plant or machine overits useful life, giving consideration to wear and tear,obsolescence, and salvage value.

< Accelerated depreciation: An accountingmethod whereby the expense is assumed to beincurred in decreasing amounts in each businessperiod over the life of the asset. Two commonlyused variations of accelerated depreciation arethe sum-of-years digits (SYD) and thedouble-declining balance (DDB) methods.

< Straight line (SL) depreciation: An accountingmethod whereby the expense is assumed to beincurred in equal amounts in each businessperiod over the life of the asset.

Businesses commonly use accelerated depreciation taxpurposes and straight line depreciation for financialreporting.

Disparity Reduction Credit (Border Cities)— A state-paid property tax credit in certain border cities thatreduces by roughly one-third the effective property taxrate of commercial-industrial property.

DOR/MDOR - Minnesota Department of Revenue.The agency that administers the state tax system andstate aids to local governments, and oversees localproperty tax assessment, property equalization, andadministrative practices.

Education Homestead Credit - A state-paid propertytax credit for residential homesteads, and the house,garage and one acre of surrounding land on anagricultural homestead that is a statutory percentage ofthe general education levy up to a maximum dollaramount.

Education Tax Credit and Deduction (Minnesota) - A refundable income tax credit and an itemizeddeduction for eligible education expenses of a dependentchild enrolled in a public or non - public school, gradesK - 12. The credit is limited to families with householdincome of $37,500 or less. The deduction has no incomelimit. Amounts paid for instruction as part of the regularschool day only qualify for the deduction. Somequalifying expenses for both the credit and deductionare: fees paid for instruction of a student throughtutoring, enrichment programs, or academic summercamps; costs paid to others to transport a student to andfrom school during the normal school day; nonreligioustextbooks and instruction materials for use during theregular school day; drivers education classes taken aspart of the school curriculum; and home personalcomputer hardware and educational software up to $200per family annually.

The credit equals 100% of eligible expenses up to $1000per eligible child ($2000 per family). The deduction islimited to $1625 per child in grades K-6 and $2500 perchild in grades 7-12.

Education Credits (Federal) - Two federal income taxcredits for higher education, the “HOPE ScholarshipCredit” and the “Lifetime Learning Credit,” that apply toqualifying education expenses for tuition and course feespaid for degree credit.

Education Interest Deduction (Federal)— A limitedfederal income tax deduction for interest paid onqualifying out-of-pocket cost of post-secondary andgraduate school loans for qualifying students. The federaldeduction carries over to the Minnesota state income taxreturn.

EITC, Earned Income Tax Credit - A federal incometax credit for low - income persons who work, primarilythose with children, to partly-offset the burden of Social


Tax Terms, Page 43

Security taxes and a rising cost-of-living. The creditreduces the amount of taxes owed (if any) or, if thecredit is more than the taxpayer’s liability the differenceis paid as a refund. Minnesota’s companion credit iscalled the Working Family Credit.

Elasticity - A measure of the change in consumerpurchases resulting from a change in the tax on (or priceof) a product or service. Less elastic goods are oneswhere the price can be increased with little effect on thequantity purchased (e.g. cigarettes).

Elderly Subtraction (Minnesota) - A mechanism inthe Minnesota income tax that allows eligible taxpayersage 65 and older (and permanently and totally disabledtaxpayers of any age) to reduce their taxable income ifthey have low income and that income is primarily fromtaxable sources (taxable pensions rather than socialsecurity). Also referred to as the senior subtraction.

Enterprise Zone - A business tax credit to qualifyingbusinesses within a targeted zone in participatingcommunities. The credits act as an incentive to createinvestment, development and job creation or retentionin areas where there is a high percentage of substandardhousing, there is at least twenty percent of thehouseholds are below the poverty level, commercial andindustrial property values are falling, or the area’sunemployment rate is above the statewide average. Anarea is designated an enterprise zone for seven years. TheDepartment of Trade and Economic Developmentadministers this program.

Equalization - The process of: (1) reducing tax rate ortax base disparities among different taxing jurisdictions;or (2) reducing net tax disparities among differentproperties within the same class in a given taxingjurisdiction. (See State Board of Equalization, State BoardOrder.)

(1) Tax Rate or Tax Base Equalization - Twodifferent taxing jurisdictions with similarspending needs but vastly disparate tax baseswould be required to set local tax rates atsubstantially different levels in order to raise thesame total revenue. Tax Rate or Tax BaseEqualization is the process of providing

additional state aid to the taxing jurisdictionwith the lesser taxable base.

(2) Equalization (of property values) - Aproperty’s assessed value represents the baselinefor determination of the payable property tax.Since the assessed value is determined by localproperty tax assessors, the system does notguarantee that values will be interpretedconsistently by all property assessors in the state.Equalization is the term that is used to describethe process of ensuring that all taxable propertyis assessed at or near its actual market value asrequired by state law.

Estate - The entire group of assets owned by anindividual at the time of his or her death. Includes allpersonal effects, interests in business enterprises, real andpersonal property, stocks, bonds, mortgages, and notesreceivable, etc.

Estate Tax - The Federal taxes levied on the transfer ofproperty from the deceased to his or her heirs. Applies toestates with gross federal estate value more than the“unified credit” per decedent ($675,000 for tax years2000 and 2001, incrementally phased up to $1,000,000in tax year 2006 and after). An additional specialexemption applies to qualifying family owned businessesand family farms.

The Minnesota estate tax is known as a “pick - up tax”because the state tax amount equals Minnesota’s portionof the federal credit for state-level estate taxes. Eachdollar of the Minnesota estate tax reduces the federalestate tax by one dollar.

EMV, Estimated Market Value - The amount that alocal assessor determines to be the value of that realestate in an open market in an arms-length transaction,less any deductions or adjustments provided by law. Thisvalue is multiplied by the appropriate class rate to arriveat the tax capacity of the property.Estimated Tax - Themethod used to calculate and pay income tax on incomethat is not subject to withholding.

Excise Tax - A tax on the sale, consumption ormanufacture of a product or substance; usually, a tax


Tax Terms, Page 44

measured by unit or volume (rather than by value).Examples include gas, cigarette, and alcohol taxes.

Exemption - (1) The exclusion from a taxpayer’staxable income of a specified amount for that person andeach of his/her dependents ($2800 per person in 2000).(2) More generally, the term may apply to any amountspecified to be free of tax liability.

FAGI, Federal Adjusted Gross Income— See AGI.

Family Preservation Aid— A state aid paid to countiesprimarily to reduce local property tax burdens for thecounty costs of providing out-of-home placementprograms for children and other family preservationprograms.

FTI, Federal Taxable Income - Federal AdjustedGross Income minus exemptions (personal anddependents) and deductions (either itemized deductionsor the standard deduction).

Fire Aid - See Judiciary Finance section.

Fiscal Disparities (“FD”) Program - Often referredto simply as “FD,” requires every taxing jurisdictionwithin a geographic area, e.g., the seven countymetropolitan area and the taconite relief area, tocontribute 40 percent of the growth (measured from aspecified base year) in the commercial/industrialproperty taxable base to an area wide pool. This taxbase is distributed among all taxing jurisdictions in thegeographic area on the basis of population and taxablereal property. The principle behind FD was todiscourage unbalanced development, especially theconcentration of new development in high propertywealth/ low - tax areas, and to redress the imbalancebetween public service needs and financial resources incertain “low-wealth” communities.

Flood Loss Replacement Aid— A temporary aidprogram (for assessment years 1998-2000) for countiesthat lost significant amounts of tax base value as a resultof the floods of 1997.

Franchise Tax - See Corporation Franchise Tax.

FUTA, Federal Unemployment Tax Act - Imposes afederal tax on employers to finance the unemploymentinsurance system (administered by the states).Minnesota’s Reemployment Insurance Tax is administeredby the Department of Economic Security.

Gas Tax - Technically the Motor Fuels Excise Tax,applies to gasoline and diesel fuels used in highwayvehicles, aircraft, boats, snowmobiles and all - terrainvehicles at a statutory rate (20 cents per gallon in 2000).An annual fee by vehicle weight and mileage applies tocompressed natural gas, propane and other alternativehighway fuels. The State Constitution requires thatproceeds go to the Highway Users fund for roadconstruction, airport improvements and maintenance,leaking underground storage tank clean up, andpetroleum grade inspection.

Green Acres - Land that qualifies by its long-termagricultural use and zoning under the MinnesotaMetropolitan Agricultural Preserves Act (M.S. 473H), forreduced assessment valuation based only on agriculturalfactors, and deferral of property assessment. The act isdesigned to preserve farmland in agricultural use andopen space within the 7-county metropolitan area.

HACA, Homestead Agricultural Credit Aid - Astate property tax relief program to all municipalgovernments, school districts, and special taxing districtsin the state. The program was initially designed toreplicate the amount of relief formerly provided by theseparate homestead and agricultural credits under theproperty tax system in place prior to the 1988 propertytax reforms.

Head of household - Income tax filing status forunmarried persons who provide more than half the costof keeping up a home for a qualifying dependent. Filingas a head-of household reduces tax liability compared tofiling as either single or married - filing - separate.

Impact of Taxation - The person, company ortransaction on which a tax initially is levied; person,company or transaction having a legal responsibility toremit the tax to the government.


Tax Terms, Page 45

Incidence of Taxation - The final burden of a tax ortaxes. Incidence usually refers to the individual,company, demographic unit or group, economic sectoror income stratum that ultimately bears the burden of atax or total taxes. The incidence of a tax will differ fromits impact if the person paying the tax can shift theburden to others, either in higher prices or lower wages.

Income - “Income has different meanings depending onboth the agency or department collecting income data,[and] the specific program under with the data is beingcollected. ... The concept of income can vary not onlybetween federal [state] departments but within adepartment itself. ... Even if the definition is the same intwo programs, there may be methodological differencesin collected the data. To really understand income data,it is essential to identify the source of data and to beaware of the specific definitions and limitations in effectfor that program at the time the data was collected.” - U.S. Department of Commerce, Bureau of the Census.

Selected definitions of income are described below. (Seealso AGI, MTI, MAGICC, and net income.)

< Income before taxes (“pretax income”) - Inthe Consumer Expenditure Survey this includes:wages and salaries; self - employment incomeincluding losses; Social Security, private andgovernment retirement income; interest,dividends, rental income and other propertyincome; unemployment and workers’compensation; veterans’ benefits; publicassistance, supplemental security income, foodstamps; regular contributions for supportincluding alimony and child support, foster carepayments; cash scholarships, fellowships,stipends; meals and rent as pay.

< Personal Income - In national economicaccounting, personal income is the incomereceived by persons: individuals, owners ofunincorporated businesses (includingpartnerships), non - profit institutions, privatetrust funds, and private non - insured welfarefunds. Personal income is the sum of wage andsalary disbursements, other labor income,proprietors’ income, rental income of persons,

dividends, and personal interest income andtransfer payments, less personal contributionsfor social insurance. It does not include capitalgains income.

<< Disposable Personal Income - Personalincome less personal tax and non-tax payments,a measure that represents a portion of personalincome available to persons for consumptionand saving.

< Self - Employment Income - Net incomereceived by persons from an unincorporatedbusiness, profession, or from the operation of afarm as an owner or tenant.

Income Tax - A tax levied on taxable income ofindividuals and businesses. (Taxable income is defined bylaw).

Indexation, Indexing - A mechanism for periodicadjustment of tax thresholds and/or progressive taxbrackets to keep taxes constant in real terms (e.g., afterinflation). In Minnesota, some tax benefit thresholds,such as property tax refunds and certain tax credits alsoare indexed.

IPD, Implicit Price Deflator - see reference for GDP inthe ‘General Terms and Acronyms” section of theglossary.

IRA, Individual Retirement Account - Tax preferencefor long-term savers to encourage the establishment ofspecial accounts and regular annual deposits to theaccounts over a lifetime for retirement and certain othermajor expenses such as a child’s post-secondaryeducation.

< A “regular” IRA provides that an annualcontribution may be tax deductible and theinvestment growth value is tax-deferred untilproceeds are withdrawn, usually afterretirement.

< A “back-loaded” IRA, such as an Education

IRA or a Roth IRA, provides for income taxesto be paid on an initial investment, which, aftera specified minimum holding period, may be


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withdrawn tax-free together with anyprofits.

< Education IRA— A savings account vehiclesimilar to a “back-loaded” individual retirementaccount whereby a taxpayer may give up to $500per year (in aggregate per beneficiary,nondeductible) as an irrevocable gift to a childunder the age of 18 for that child’s highereducation expenses. Qualifying withdrawals aretax-free to the beneficiary.

IRC - The Federal Internal Revenue Code.

IRS - Internal Revenue Service, U.S. Department ofTreasury.

Itemized deductions - For federal income tax, taxpayermay deduct the larger of itemized deductions or thestandard deduction. Itemized deductions are the sum of(1) any medical costs in excess of 7.5% of AGI, (2) stateand local taxes on income or property, (3) homemortgage interest, (4) charitable contributions, and (5)miscellaneous deductions. Those who itemize deductionsare referred to as “itemizers.”

Joint return— Federal and state income tax filingstatus that can be used by a married couple. The marriedcouple must be married as of the last day of their tax yearin order to qualify for this filing status.

June Accelerated Payments - Venders with annualsales and use tax liability of $120,000 or more arerequired to make an early payment of 75 percent of theirJune liability. (Scheduled to drop to 62 percent startingJune 2002). The June payment is due three business daysbefore the end of June, rather than on the 14th of thefollowing month, thus shifting those payments into theearlier fiscal year. This “fiscal shift” was first enacted in1983.

LGA, Local Government Aid - A primary source ofstate property tax relief aid to cities and townshipsdistributed in part on a grandfathered basis and in partaccording to “need factors” that include population, the

percent of commercial and industrial property in thetaxable base, and the percentage of older housing

Lawful Gambling Tax - State tax paid by organizationsthat legally conduct bingo, raffles and paddle wheels,with exemptions for limited occasional sales, small rafflesand certain fairs and festivals. Applies to gross receiptsminus actual prizes paid from these fundraising activities.

Levy - (1) The total dollar amount raised in propertytaxes by a local unit of government. (2) A tax, fee orsurcharge. (3) The imposition of such a charge.

Levy Limit(s)— A restriction, usually by statute, on thetotal amount to be raised by a levy (property taxes) or onthe tax rate; or, restrictions on the year-to-year growthin the rate, revenue yield of a levy, or the revenue yieldof a levy plus changes state aid amounts.

LLC, Limited Liability Company - A state-registeredbusiness operating form that allows the firm to be taxedlike a partnership or S-corporation (taxed only at theindividual level rather than being subject to corporate-level taxes) but its owners (like corporateshareholders)are not personally responsible for theentity’s debts and liabilities.

Limited Market Value - A restriction on the amount ofthe growth in a property’s estimated market value that issubject to taxation. The growth limitation - whichapplies to residential homestead, residential seasonalrecreational, and agricultural property - is equal to thegreater of 8.5 percent of the difference between thecurrent-year estimated market value and the prior-yearestimated market value or 15 percent of the differecebetween the current estimated market value and thevalue upon which the property was taxed in the previousyear.

Local Impact Note - An analysis of the fiscal impactsof proposed legislation or administrative rule changes onlocal governments. Notes are prepared by theDepartment of Finance at the request of the chair orranking minority member of the House or Senate TaxCommittee.

LIHC, Low Income Housing Tax Credit - A taxcredit created by the federal Tax Reform Act of 1986 in


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order to encourage the private sector to invest in theconstruction and rehabilitation of housing for low- andmoderate-income families. The law gives states anannual tax credit allocation based upon population. TheMinnesota Housing Finance Agency administers thisprogram in Minnesota. The LIHC are awarded on acompetitive basis to nonprofit and for-profit sponsors ofeligible housing projects. Awards are based on thecriteria outlined in the Minnesota’s Allocation Plan.Project sponsors, or in the case of syndication, investorsclaim the tax credit on their federal income tax return.

Long Term Care (LTC) Credit (Minnesota) - Incometax credit for long term care insurance premiums. Equalsthe lesser of $100 or 25 percent of those premiums.

M-1 - Minnesota income tax return form forindividuals.

MAGICC, Minnesota Adjusted Gross Income forChildcare Credit. Includes both taxable and nontaxableincome as reported for purposes of the Minnesotaincome tax child and dependent care credit. Commonlyused in tax research and analysis as “household income”data.

Marriage Penalty Credit (Minnesota) - Income taxcredit for some taxpayers filing a joint tax return.Offsets the “marriage penalty” that would otherwiseoccur because Minnesota tax brackets for joint returnsare less than twice as wide as those for single filers.Without this credit, enacted in 1999, some marriedcouples would pay higher taxes than two single personswith the same incomes.

MinnesotaCare Taxes - Provider tax applied tohospitals and surgical centers, health care providers,prescription drugs, and some medical supplies andequipment at wholesale. Proceeds fund the MinnesotaHealth Care Access Fund for the Minnesota Care healthinsurance program.

MTI, Minnesota Taxable Income - Federal TaxableIncome plus “Minnesota additions” minus “Minnesotasubtractions”. Major Minnesota additions include (1)state income taxes claimed as an itemized deduction onthe federal income tax return and (2) non-Minnesota

state and municipal bond interest. Major Minnesotasubtractions include (1) state income tax refundsreceived by itemizers, (2) U.S. Bond interest, (3)qualifying K-12 education expenses, and (4) thecharitable deduction for non-itemizers.

Mortgage Registry Tax - An ad valorem tax onprincipal debt secured by a mortgage of real property,paid by the lender who records or registers the mortgage.

Motor Fuels Tax, “Gas Tax” - revenues are depositedin the Highway User Fund to be used for transportationpurposes. The current 20 cents per gallon on gasolineand diesel fuel generates over $550 million annually.

Motor Vehicle Registration Tax - Tax imposed atregistration, then annually, on motor vehicles using thepublic streets and highways, evidenced by a license platewith current - year tag. The tax is in lieu of a propertytax. Administered by the Department of Public Safety,revenues are deposited in the Highway User TaxDistribution Fund.

“MVET” - Formerly, the Motor Vehicle Excise Tax,now officially, the “Sales Tax on Motor Vehicles” or“STMV” .

Nexus - Economic connections or links to a statethat result in a legal liability to pay or remit taxes to thatstate.

Net Income - The difference between a business’ totalrevenues and its total expenses.

Net Operating Loss, “NOL” - A net operating loss isexperienced by a business when business deductionsexceed business income for the fiscal year. For incometax purposes, a net operating loss can be used to offsetincome in a prior year, or a taxpayer can elect to foregothe carry back and carry the net operating loss forwardto offset income in a future year.

Notice of Proposed Property Tax - Part of the Truth-in-Taxation process, an estimated statement of propertytax for each political subdivision that levies a tax onthat parcel payable in the following year underhypothetical budget and levy assumptions. Notices are


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distributed to property owners prior to Truth-in-Taxation hearings and the hypothetical levies on thenotices establish an upper limit on local levies.

Original Issue Discount, “OID” - When along-term debt instrument is issued at a price that islower than its stated redemption value, the difference iscalled Original Issue Discount.

Passive Activity - Trade, business or rental activitiesthat the taxpayer does not materially participate inmanaging. All income and losses from passive activitiesare grouped together on an income tax return, and lossdeductions are generally limited or suspended until thepassive activity that generated them is disposed of in itsentirety.

PILT, Payment In Lieu of Tax - A payment, whethervoluntary or required by law, made by an owner of taxexempt property to a local government as a contributiontoward the cost of the public services provided to theproperty. Specifically, the Commissioner of Revenueadministers a state program that makes payments-in-lieuof tax to local governments for land held and managedfor natural resources purposes by the Department ofNatural Resources.

Pre-tax Account - Accounts established by employersthat allow employees to pay for certain expenses withpre-tax dollars. Eligible expenses include (1) out-of-pocket medical expenses and (2) up to $5000 in childcare expenses.

Property Tax Rebate - For property taxes payable in1997 and 1998, a state-paid rebate for Minnesotahomeowners and farmers equal to 20 percent of thelocal property tax on a residential homestead oragricultural homestead; and for renters, equal to 20percent of rent constituting property taxes (e.g., 20% X19% of rent = 3.8% of rent paid). The rebate, which hada $1,500 maximum in 1998, was claimed on theindividual income tax return.

Property Tax Reform Account - An account withinthe general fund, which receives its revenues frombudget surpluses based on the November revenue

forecast in odd-numbered years. Funds in the accountmay only be used for specified property tax reformexpenses and property tax rebates.

PTR, Property Tax Refund - Property tax reliefprograms administered as direct payments to individuals.The “Circuit Breaker” refund for homeowners and the“Renters Credit” are based on net property taxes relativeto income; the “Targeting” Refund for homeowners isbased on the percentage increase in tax above a statutorydollar threshold.

Pull - Tab & Tipboard Tax - State tax on lawfulgambling activities applied at a flat percentage rate(1.7% starting in FY2001) to each “deal” (package orgame) of pull tabs or tipboards sold by a distributor.

Refundable credit— In the income tax, an after-taxcredit where a filer who does not owe a tax receives thefull credit amount or, if the credit amount exceeds ataxpayers’s liability, the balance is paid as a refund.

RDCs, Regional Development Commissions - Multi-county and multi-jurisdictional statutory commissionscreated in the regional development act for the purposeof intergovernmental cooperation.

Renters Credit - A property tax relief programprovided to occupants of rental property, complement tothe homeowners’ “circuit breaker.” The credit is basedon a statutory percentage of rent deemed to constituteproperty taxes and renters’ household income. (SeeProperty Tax Refund.)

RRTA, Rail Road Retirement Act. Tier I railroadretirement is an employer-employee tax in lieu of theSocial Security Tax (OASDI/HI), on railroademployment.

Revenue Estimate - Official fiscal analysis (similar to afiscal note) prepared by an Executive branch agency,forecasting the revenue loss or gain from the enactmentof proposed tax legislation. Prepared by the ResearchDivision of the Department of Revenue.

Sales Ratio - An analysis (“sales ratio study”) used bythe Department of Revenue to measure the accuracy of


Tax Terms, Page 49

local assessors’ estimates of taxable property values bycomparing, for properties that have recently been sold,the ratios of the assessor’s estimated market values to theactual sale prices of the individual properties. A salesratio of 100 percent suggests that the aggregate estimatedmarket values of properties selling within a geographicalboundary are exactly equal to the actual sales prices ofthose properties. When the sales ratio for a particularclass of property falls below 90 percent or exceeds 105percent, the State Board of Equalization is authorized toissue a State Board Order increasing or decreasing thetaxable values of all properties in that class andassessment area by a flat percentage across the board, inorder to achieve greater equalization of taxes among likeproperties. Sales ratios are also used to equalize propertyvalue across jurisdictions for the purpose of distributingvarious state aids (see Equalization).

Sales and Use Tax - The taxes on the purchase oftaxable goods and services (as defined in law) used orconsumed in Minnesota, paid by the final consumer.Sales tax is paid by the purchaser to the seller who remitsthe tax to the state. The use tax normally is paid directlyby the purchaser to the state.

STMV, Sales Tax on Motor Vehicles - Applies topurchases of motor vehicles required to be registered inMinnesota; applies at the same rate as the state sales anduse tax. Receipts are deposited in the general fund.(Formerly, the Motor Vehicle Excise Tax, or “MVET.”)

Self -Employment Tax - A tax that applies to earningsfrom self - employment in lieu of the Social Security Tax(OASDI/HI). A self - employed individual pays both theemployer and employee share.

Severance Taxes - Taxes imposed on the removal ofnatural products from land or water and measured byvalue of quantity of products removed or sold. Thesemay include oil, gas, minerals, gravel, timber and fish.

Special Assessment - A means of collectingcompulsory contributions from property ownersbenefitted by a municipal improvement to real property(such as installation or repair of a sidewalk or sewer)where the assessment is proportional to benefit, and theproperty owner has the option to spread the charges over

multiple years and to pay the bill with real propertytaxes.

Special Service District - An area within a city wherespecial services are provided and the cost of providingthese services is funded from revenues generated fromspecial service charges imposed upon the district.Property included in a special service district is usuallyclassified as commercial, industrial or public utility.Examples of special services are: maintenance ofsidewalks, streets or special street lighting, or provisionof security personnel.

Special Taxing Districts - Usually created by speciallegislation, or by citizen or local government initiativeunder general statutory authority, areas within which alevy is imposed or collected for the delivery of a specifiedservice such as a rural ambulance district, a fire-protection district, or a town subordinate service district.

Special Taxes - Taxes on cigarettes, tobacco, beer,wine, liquor, and gambling products, hazardous and solidwaste, insurance taxes, and certain compulsory fees.

Standard Deduction - For federal income tax, taxpayermay deduct the larger of itemized deductions or thestandard deduction, which varies with filing status. In2000, the standard deduction was $7,350 for a jointreturn, $4,400 for a single filer, and $6,450 for a head ofhousehold.

State Board of Equalization - A board of review led bythe Commissioner of Revenue which oversees propertyassessment practices around the state. The Board usesa “sales ratio study” to evaluate and - when necessary—to adjust taxable market values for a specific class withina specific geographical boundary when market values arefound to be inconsistent with actual sales prices.

State Board Order - An order issued by the StateBoard of Equalization requiring that assessed values for agiven class within a given geographical boundary beadjusted - usually upward— to reflect the true estimatedmarket value of the class of property in question, basedon actual sales prices and other information from theCRV.


Tax Terms, Page 50

Targeting Refund - A state property tax reliefprogram that ‘refunds’ part of the local property tax billto the owners of residential homestead property, whenthere is a relatively large one-year increase in propertytaxes. (See PTR.)

Taxes - Compulsory contributions exacted by agovernment for public purposes.

Tax Capacity - A term used to describe the “propertytaxable base” of a taxing jurisdiction or of a single parcelof property. The tax capacity of an individual propertyis defined as the estimated market value of the parcel ofproperty multiplied by the appropriate class rate. Thetax capacity of a county, for example, is the sum of thetax capacity of all parcels of property in that county.(Also see ANTC, Education section.)

Tax Court— The 3-judge court created in M.S. Ch. 271as an independent agency of the executive branch ofgovernment with statewide jurisdiction for hearings anddeterminations of law arising under the tax laws of thestate. Members are appointed by the Governor with theadvice and consent of the Senate.

Tax Expenditure - Revenue losses attributable to taxpreferences such as a tax exemptions, deductions,reduced rates, credits and deferrals of liability. Taxexpenditures are alternatives to direct expenditures ormandates in promoting public policy goals. Unlike directappropriations, tax expenditures usually are not time-limited and need not be re-enacted. The Departmentof Revenue calls a provision a tax expenditure if it meetsall of these criteria: (1) it has an impact on a tax that isapplied statewide; (2) it confers preferential treatment;(3) it results in reduced tax revenue in the applicablefiscal years; (4) it is not an appropriation; (5) it isincluded in the defined tax base; (6) it is not subject toan alternative tax; and (7) it can be amended or repealedby a change in state law alone.

Tax Preference - Non-taxability of an otherwise-taxable item of income, consumption or expenditure.

Tax Rate - Percentage or proportional application of atax.

< ETR, Effective Tax Rate - Total tax paymentsas a percent of income (normally, gross income).May apply to a given tax, such as the individualincome tax, or to the total tax burden for anindividual, couple, family, household, incomegroup or, an economic sector.

< Local Tax Rate - The rate of tax determinedby dividing the amount of a local government’slevy by the total tax capacity of all taxableproperties within that local government’s taxingjurisdiction.

< Total Local Tax Rate - The sum of local taxrates levied on a parcel of property. A propertylocated in a county with a 50 percent tax rate, acity with a 25 percent tax rate, a school districtwith a 25 percent tax rate, and special taxingdistrict with a 5 percent tax rate is said to havea total local tax rate of 105 percent.

< Marginal Tax Rate - The rate of tax on anincremental unit of income (e.g.,“the last taxabledollar” or, “the next dollar earned”).

“This Old House” - For property tax purposes, delayedand phased-in recognition of an increase in taxablemarket value that results from improvements made bythe owner to a qualifying residential homestead.

TIF, Tax Increment Financing - A development toolused by city governments and qualifying developmentauthorites that allows the additional property taxesgenerated by a new or improved development (known asthe “tax increment”) to be used to pay for the costs ofthe development if the city or authority finds that thedevelopment would not occur without such assistance.Thus, the added property taxes generated from adevelopment pay for the cost of acquiring the land,preparing the site, or other development costs instead ofpaying for the cost of general government provided by allunits of government in which the development islocated.

<< Tax Increment - The difference between the“base amount” of property tax revenuegenerated by the parcel(s) located in a taxincrement district - generally defined as the


Tax Terms, Page 51

amount of tax revenue that was beinggenerated prior to the designation of atax increment district - and the amountof property revenue generated after thedevelopment in the district hasoccurred.

< Tax Increment District - The geographic areathat includes the parcels of property expected todirectly benefit from tax increment financingand from which “tax increment” will becaptured. The duration of a tax incrementdistrict is statutorily limited depending on thetype of district and when it was established.Only after a tax increment district has expired isthe additional property tax revenue generated bya development distributed to all local taxingjurisdictions in the same proportion as are otherproperty tax revenues.

Transit Pass Credit (Minnesota) - Income tax creditfor employers who subsidize employee purchases oftransit passes. Equals 30 percent of employer costs.Enacted in 2000.

Truth-in-Taxation, “T-in-T” - A process designed toinvolve citizens in local government before budget andtax decisions are made by local units of government.Each December, notices are sent to homeowners andpublished in local newspapers informing citizens ofproposed property tax increases. Citizens are invited toattend a public hearing with local elected officials tovoice their opinion about proposed levies and budgets, orother concerns.

Unemployment Insurance Tax (technically, thereemployment insurance tax) - An employer tax,deposited in the Minnesota UnemploymentCompensation Fund to pay benefits to eligibleunemployed workers. Administered by the Dept. ofEconomic Security tax under federal law (see FUTA).

UBIT, Unrelated Business Income Tax - A federaland state tax paid by tax - exempt organizations onincome attributable to activities unrelated to theirexempt purposes.

Use Tax - Companion to the sales tax, this tax appliesto use or consumption in Minnesota by individuals andbusinesses who buy or lease taxable goods and servicesout of state or from out-of-state firms. The tax is meantto prevent evasion of the sales tax, equalize the taxburden on those who make purchases from within andwithout their state of residence, and treat competingsellers equitably. An individual may purchase up to$770 worth of otherwise-taxable items in a calendar yearexempt from the use tax, under the de minimisexemption. (See also, Sales and Use Tax.)

UTJ, Unique Taxing Jurisdiction - A geographicalregion with a unique total local tax rate, meaning thatthe sum of the county, city or township, school district,and any special taxing district is unique. In other words,any two properties located in the same county, city ortownship, school district, and all special taxing districtsare said to be in the same UTJ.

Young Child Credit (Minnesota) - A refundableincome tax credit for married parents of infants less thanone year of age. These parents qualify for Minnesota’sChild and Dependent Care Credit even if they have notpaid others to care for the child and only one spouse hadearned income. The credit may be claimed in the child’sbirth year only, and only if the parents do not use anemployer plan to pay for child care from pre - taxincome.

Withholding - Taking out part of an employee’swage or salary as a deposit for future tax liability.

Withholding Tax - A tax paid by employees throughpayroll deduction of part of their wages or salaries.

“WFC,” Minnesota Working Family Credit - Arefundable state tax credit for lower-income wageearners and the self-employed, primarily parents ofdependent children. All eligible for the federal EarnedIncome Tax Credit (EITC) are eligible for this credit, butthe WFC amount is no longer a straight percentage ofthe EITC amount.

“WOTC,” Work Opportunity Tax Credit, (Federal)—A federal income tax credit enacted in 1996 that


Tax Terms, Page 52

encourages employers to hire from among 7 targetedgroups of job seekers, primarily those in the welfare-to-work transition and their family members.

Transportation Terms, Page 53

Transportation800 MHz- A new technology radio system that allowsdigital technology benefits over older analog systems.The frequency is reserved for public safety purposes bythe FCC.

CMAQ, Congestion Mitigation and Air Quality,These “flexible” federal funds can be used for highwayprojects or for mass transit needs with a goal of reducingcongestion and improving air quality. The funds,currently at about $13 million per year, are awarded tocompeting projects by the Metropolitan Council.

Commuter Rail- A fixed guideway mass transit systemthat uses existing freight rail lines to transportcommuters. The system would operate during peak hoursas capacity on the rail lines is leased from the railroadcompany.

CSAH, County State Aid Highway Fund, a fundestablished by the state constitution for distribution of aportion of the Highway User Tax Distribution Fund forconstruction and maintenance of county roads.

Flexible Funds- Funds that are not dedicated to aspecific purpose but may be used for several differentuses such as transit operation, highway construction,transit capital, etc.

Highway Debt Service- Debt service paid from theTrunk Highway Fund to pay principal and interest onTrunk Highway Bonds.

HUTDF, Highway User Tax Distribution Fund - Afund established by the Minnesota Constitution todistribute motor fuels tax and vehicle registration taxrevenues. The distribution of the combined tax revenueis 62 percent to the Trunk Highway Fund, 29 percent tothe County State-Aid Fund and 9 percent to theMunicipal State Aid Fund.

LRT, Light Rail Transit- A fixed guideway masstransit system, usually used to refer to the HiawathaLight Rail line.

MCTO, Metropolitan Council Transit Operations - agency that supplies bus service to the Twin Citiesmetro area. Formerly known as the MTC, orMetropolitanTransit Commission.

Metro Mobility - The provider of transit services fordisabled commuters in most of the Twin Cities area.

MN/DOT, Minnesota Department of Transportation - the state agency responsible for road construction andmaintenance, as well as airport, waterways and railroadregulation.

Motor Fuels Tax, “Gas Tax” - revenues are depositedin the Highway User Fund to be used for transportationpurposes. The current 20 cents per gallon on gasolineand diesel fuel generates over $550 million annually.

MVET, Formerly, the Motor Vehicle Excise Tax, nowofficially, the “Sales Tax on Motor Vehicles” or “STMV” .

Motor Vehicle Registration Tax - Tax imposed atregistration, then annually, on motor vehicles using thepublic streets and highways, evidenced by a license platewith current - year tag. The tax is in lieu of a propertytax. Administered by the Department of Public Safety,revenues are deposited in the Highway User TaxDistribution Fund.

MSAS, Municipal State Aid Streets Fund, a fundestablished by the state constitution for distribution of aportion of the Highway User Tax Distribution Fund forconstruction and maintenance of local roads.

PRT, Personal Rapid Transit - A model for afuturistic mass transit system in which a network ofguideways would be placed throughout an area withmultiple destinations. Riders would get in individualcars and select their destination and the computercontrolled vehicles would deliver them to the selectedlocation, bypassing all other stops. The system is hasnot yet been implemented in a large metropolitan areaand has yet to be proven to be cost effective.


Transportation Terms, Page 54

STMV, Motor Vehicle Sales Tax - see Taxes section.

TEA 21 - the re-authorization of ISTEA or thefederal law that sets funding formulas for distribution ofthe federal transportation trust funds. The law setsformulas for the next six years.

TRLF, Transportation Revolving Loan Fund - Arevolving fund set up to advance road construction andtransit projects. “Seed money” is used to leverage anissuance of bonds through the Public FacilitiesAuthority. Proceeds are loaned to local governments,MN/DOT and the Met Council at a low rate of interestto speed up projects that do not fit within currentbudgets. (The loan fund is generally used when isfinancially beneficial to do so. For example, a roadconstruction project without funding in a current budgethas right-of-way costs escalating at a rate of 15% per yearand TRLF funds can be accessed at a 5% interest rate.Cheaper borrowing costs make it beneficial to seek fundsthrough the TRLF and pay for the project over a periodof years.)

Trunk Highway Bond- Bonds issued to pay forconstruction projects on the trunk highway system.Trunk Highway Projects may not be funded by GeneralObligation or GO bonds as required by the StateConstitution Art XIV Section 11. Bonds must be repaidfrom highway related revenues.

Trunk Highway Fund - A fund established by ArticleXIV, Section 6 of the State Constitution to pay for theMinnesota Trunk Highway System. The Trunk Highwayfund is a portion of state transportation revenue fromthe Highway User Tax Distribution Fund. (See alsoHUTDF.)