It’s not all about the weather: Law change to alter budget forecast

Published 4:41 pm Monday, February 20, 2023

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By Brian Bakst, Minnesota Public Radio News

Most Minnesotans have their eyes on the whopper of a snowstorm in this week’s weather forecast. Many state lawmakers have theirs on the blizzard of money anticipated in next week’s state economic forecast.

That report will prescribe what money is available when the Legislature crafts a new, two-year state budget this session. By a 35-30 vote Monday, the Senate gave final approval to a bill making a subtle but important change to Minnesota economic forecasting; it’s certain to have an impact on the size of the pot before lawmakers.

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For the past two decades, Minnesota finance officials have estimated inflationary cost increases in state spending when issuing twice-yearly budget forecasts. But they’ve been forbidden from formally factoring it into surplus or deficit predictions.

The bill headed for a supportive Gov. Tim Walz will again make inflation a required ingredient in determining the top-line number in the forecast. Some programs have inflationary bumps in state law, but most don’t.

Senate Finance Chair John Marty, DFL-Roseville, said it’s about transparency. He drew on the storm predictions for the week, which might come to pass or not.

“The forecast is significantly different from the work we do here just like a weather forecast is significantly different from how you react to what weather you face,” Marty said. “You like to have the best possible information in front of you.”

At last check, inflation was expected to boost state costs by $1.5 billion in the next two years and another $3.3 billion in the two after that. But those numbers weren’t baked into the estimate of a $17.6 billion budget surplus announced in December.

From a practical standpoint, the law change will make the likely surplus appear smaller when the forecast is released next Monday.

It would remain up to the Legislature to decide where the dollars in state coffers go.

But Republicans said the current estimates provided by state economic experts are sufficient, and they contend the law change will only leave less room for tax cuts. They said it would set Minnesota’s budget on autopilot and assume that the same programs approved in prior years deserve to continue.

Sen. Andrew Mathews, R-Milaca, said building inflation into state expenses will make a current surplus shrink and squeeze out tax cuts.

“That’s what this bill will do,” Andrews said. “One more tool for the $17.6 billion surplus that the government and the majority is sitting on like the Scrooge McDuck pot of gold and not giving that money back to the people of Minnesota who want their money back.”