Editorial: Lower revenue forecast should be sign of caution

Published 9:29 am Monday, March 7, 2016

A new state revenue forecast Friday splashed some chilly reality on hopes for big tax cuts and/or sizable new spending from the 2016 Minnesota Legislature. While the state budget remains safely in the black, its spendable excess is down $300 million from a forecast issued just three months ago. The sum legislators have to work with through June 30, 2017, is now $900 million, compared with the $1.2 billion projected at the end of November.

A change in outlook that large and that fast should be seen by lawmakers as a big flashing “caution” signal. So should word that the forecast surplus for the coming two-year budget period is not $1.8 billion (two times $900 million) but $1.2 billion, and that’s without factoring in expected inflation in spending. When inflation is considered, the black ink on the 2018-19 bottom line turns red.

That much change stems largely from a slowdown in both national and global economic growth that’s crimping both income and sales tax collections at the state level, state economist Laura Kalambokidis explained. It’s also the consequence of a labor shortage that is tightening as baby boomers exit the workforce and is already keenly felt in parts of Minnesota.

Email newsletter signup

Friday’s forecast tells us that state lawmakers should scale back any spending and tax-cutting ambitions. For example, the majority House Republicans should rethink plans for ballooning tax cuts for both businesses and Social Security recipients, and should go easy on redirecting several sales tax streams from the general fund to the state’s trunk highway fund. Each of those moves carries fiscal risk; doing both simultaneously in light of Friday’s forecast would be reckless.

Similarly, the forecast should advise Gov. Mark Dayton to throttle back his push for free preschool for all of the state’s 4-year-olds. His zeal for early education as a tool to improve lives is commendable. But preschool in every school district carries a big price tag, and likely would not produce as much gain for needy children as would the means-tested approaches Dayton signed into law last year — preschool scholarships and School Readiness grants to school districts.

Legislators are well-advised instead to favor ideas for more modest and/or nonrecurring measures that would help meet what should be the state’s top policy goal in the next decade — attracting and keeping a skilled workforce.

For example, capital investments in higher education, transit and water treatment upgrades, financed with state bonds that carry a 20-year payback, make good sense. So does one-time spending to hasten the arrival of broadband Internet service throughout the state. Tax relief aimed at young working families, such as Dayton’s proposed child care tax credit increase, would be well-timed.

Sustaining fiscal stability may not score many political points for election-minded legislators. But it’s a worthy goal for serious stewards of this state. A stable state budget is an asset that eluded Minnesota for a dozen years, from 2001 to 2013. The results were rapidly rising property taxes and college tuition, and a pinch in the services that make Minnesota an attractive place to live and work. Much would be lost if the state budget slips into the red once more. Friday’s forecast serves as a reminder of how quickly fiscal stability can erode.


— Minneapolis Star Tribune, Feb. 26

About Editorial Roundup

Editorials from newspapers around the state of Minnesota.

email author More by Editorial