How do you get to eight straight positive budget forecasts?
Minnesota’s budget success didn’t happen by luck or chance. Instead, the answer is six years of sound fiscal management and leadership of Gov. Mark Dayton. His brand of budgeting is structural balance. And it has worked.
The February budget forecast revealed a surplus of $1.65 billion for the next two years, up $250 million from our projections in November. The forecast shows that Minnesota’s projected revenues continue to outpace spending, which is the definition of structural balance. In fact, our state economist’s projections show a structurally balanced budget for the next four years.
Thanks to hard-working Minnesotans, our state’s economy and employment are growing. Our income and wages are rising, our budget is balanced, and we continue to be recognized as a great place to live and thrive. US News World Report recently ranked Minnesota as one of the best states in the nation for opportunity, health care, and infrastructure.
Part of sound fiscal management is taking risks seriously – and this forecast comes with its share of significant risks. The U.S. is currently in the fourth longest economic expansions on record – and we know that expansions cannot last forever. Economic policy at the federal level also faces considerable uncertainty – from the repeal of the Affordable Care Act to changes in trade policy, to large budget cuts for federal agencies that translate to cuts to Minnesota. If we want to maintain the state’s strong financial health, we must ensure that Minnesota’s structurally balanced budget is positioned to weather changes.
As we approach the halfway point of the 2017 legislative session, we urge legislators to stay the course. Maintain Gov. Dayton’s sound fiscal management through fair and adequate revenue, structural balance, smart investments, and a sufficient rainy-day fund.
Fair and adequate revenue
We must remember that we have been here before. Minnesotans have seen firsthand how quickly balances can turn into deficits.
In 1999, state leaders saw the Minnesota’s large budget surplus as a chance cut income taxes across the board. Many thought we could afford the tax cuts, but budgeting is not just about the current year; it is about projecting for the future.
The 1999 income tax cuts were made just before the dot-com bubble burst in 2000. State spending soon outpaced revenues and the state’s surplus turned into deficits for the next nine out of 11 years.
When Dayton took office in 2011, he was handed that legacy. By attuning our taxes to our growing economy, he helped create revenues that are structurally balanced. From this experience, he understands that tax cuts this year must be targeted to those who need them most while carefully maintaining the structural balance in our budget going forward.
Under Dayton’s leadership we have invested in Minnesotans – our greatest resource – with increased school funding and a targeted expansion of tax credits and deductions. It’s paying off:
- Our schools are closing the achievement gap, raising graduation rates, and expanding access to quality early learning programs.
- Our unemployment rate is 4.0 percent, lower than the national rate of 4.8 percent, thanks to our diverse and growing economy.
- We consistently place near the top of national business ranking thanks to our education system, quality of life, and productive workforce.
- Our state’s credit outlook has improved, with major ratings agencies citing our strong financial management, replenished reserves, and structurally balanced budget.
We must continue to make investments to ensure all Minnesota families and businesses prosper and grow – whatever the future brings.
Sufficient rainy day fund
Finally, Minnesota is recognized as a leader in developing and implementing its rainy day fund. Recently the Pew Charitable Trust praised Minnesota for our strong reserve policy that automatically sets money aside for unexpected deficits or other budget challenges caused by economic conditions. At almost $2 billion, we now have one of the largest cash and budget reserves on record and are approaching the recommended reserve target.
To keep Minnesota growing and secure, we need to stay the course with structurally balanced budgets and smart investments, and prepare our state for unexpected economic downturns.
Any tax or budget changes we make this year must not shortchange our students, families, or businesses. Let’s focus on long term economic strength by supporting the success of all Minnesotans.
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