Editorial: Be cautious with state’s $1.65B surplus

Published 9:38 am Thursday, March 9, 2017

The good news is that the state budget surplus appears to be growing as it is estimated at $1.65 billion. The bad news is there are a number of legislators proposing to spend it down or reduce income with tax cuts.

Nearly eight years ago, Minnesota faced a near $6 billion budget deficit. Let’s hope legislators and the government have a good memory about how difficult it was to get out of that.

Spending had to be slashed, funds were withheld from schools, interest costs rose as we borrowed more and our credit rating was threatened. Ultimately, Gov. Mark Dayton has to raise income taxes on high income Minnesotans.

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For the last six years or so, we’ve been on a more stable footing. We’ve built up our budget reserves to a level near where most economists say we should be.

Some new investments may be prudent at this point, especially in the area of schools, and some tax relief also makes sense, especially in the area of farm property taxes. The Legislature is also homing in on a tax credit for those paying back student loans, which would be one of the first of its kind in the country.

But a recent report also showed that big changes in the Affordable Care Act at the federal level may cost the state hundreds of millions of dollars. Some GOP proposals call for cutting back federal funding to state for Medicaid, the program that provides health care to the poor.

Minnesota was one of the first states that expanded Medicaid under the ACA and while it covered many people who were never before covered, it is an expensive proposition.

A recent report on broad outlines of the ACA changes proposed by the GOP led Congress could cost the state $1.3 billion in 2019 and up to $5 billion by 2021. That would all but wipe out Minnesota’s surplus.

The national economy may be another wild card for the state’s budget. The Federal Reserve is estimating it will raise interest rates again in 2018 and maybe more than once.

Growth in military spending proposed by President Donald Trump could also boost the federal deficit and create a ripple effect back to the states.

Now is not the time to “throw money around” at the state level. We urge legislators and the governor to be prudent, and build up our surplus for the rainy days that appear to be on the horizon.

Economic uncertainty could create state budget deficit again.

— Mankato Free Press, March 6

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