Minnesota officials expect $1 billion spending surplus
Published 1:40 pm Thursday, December 4, 2014
ST. PAUL — Minnesota finance officials predicted Thursday that lawmakers will have a $1.037 billion budget surplus at their disposal in the upcoming session, but just keeping programs afloat at current levels would chew up much of the money.
The estimate provided in a new economic forecast should make for a smoother path to a new two-year budget. The Legislature convenes in January and will get a proposed budget from Democratic Gov. Mark Dayton later in the month.
While Dayton will use the figure to shape his budget, legislators get one more forecast report in late February or early March before they must approve a plan.
Still, the financial cushion should be welcome news at a Capitol where lawmakers have spent years battling deficits, repaying IOUs and refilling rainy-day accounts. Lawmakers from both parties were planning to sound off on where the money should go.
“It’s been a long climb up,” said Minnesota Management and Budget Commissioner Jim Schowalter.
The projection is drawn from economic growth estimates combined with tax and spending patterns. Total revenue for the two-year budget cycle that begins next July is projected to be just shy of $41.9 billion.
The current fiscal year that ends in June should close with the state having $556 million in unspent money. Of that, $183 million would be automatically transferred to the budget reserve, but the rest could be parceled out for one-time needs.
As for the bigger surplus awaiting them, lawmakers could be hesitant to spend every dime.
A lot can change — and quickly. Consumer spending can pick up or taper off. Businesses can hire or shrink. A zooming stock market can drive up income tax collections. Nasty weather can temporarily dampen the economy. A global slowdown can ripple into the state.
Officials said that while the jobless rate has plummeted, employee wages haven’t risen as fast as anticipated. The housing market isn’t taking off as fast as economists predicted, either. On the upside, lower energy prices have given people more money in their household budgets to make other purchases.
The new forecast seeks to make sense of the swirl of data with an informed guess about what taxes and spending will look like years into the future.
And the figure can be deceptive.
State law prevents financial analysts from including inflationary cost increases in their assessment of program budgets. So even as the cost of salaries, heating bills and other expenses rise, the forecast assumes static prices into the future with the exception of demographic shifts such as increased school enrollment.
Including across-the-board inflationary estimates in their prior forecast would have added about $900 million to state expenses in the next budget. Lawmakers who want inflation kept out of the economic analysis argue that program advocates should have to make the case for higher spending and shouldn’t presume the state budget is on auto-pilot.
It didn’t take long for groups in search of higher spending to make their pitch. The “5% Campaign,” which advocates for services for the elderly and disabled, said a rate increase for care providers is in order.