A small budget surplus of $399 million in the current budget and a big shortfall of $6.2 billion in the next budget cycle are caused by federal money running out and onetime fixes from the legislature and governor. “In the short-term the state is taking care of its business… in the long-term there’s significant unfinished business ” according to Budget Commissioner Steve Sviggum. Both Sviggum and State Economist Tom Stinson said the state has “played all its cards” with onetime cuts and shifts and the next legislature will have to look at structural changes to the budget.
A couple of bright spots included agricultural and wages. Sviggum, who’s always happy to find a sunny side, said “What’s good about Minnesota is wage growth is better here than nationally.” Construction is a dark area and will continue to lag. There is no need for unallotment or short-term borrowing. Dr. Stinson said as far as a bonding bill for state construction projects “there’s not a lot the state can do to stimulate.” Stinson also said gubernatorial candidate Mark Dayton’s plan to tax the rich doesn’t do much in the short-term and in the long-term could be a “drag on growth” unless the money is spent on maintaining our strong workforce.
Stinson’s has said many times and again Thursday that protecting Minnesota’s one competitive advantage–its talented workforce–is job one for maintaining a strong economy. If the dollars from Dayton’s tax hikes at the top translate into sustaining quality education, the state gains.
And they almost certainly will if, for no other reason, than this revenue will head off the level of budget cuts that would compromise quality education.
Stinson has also testified in the past that cutting state spending instead of increasing income taxes at the top will induce job loss in the state. The reason: cutting state spending will cut public servant paychecks which in turn will reduce demand for goods and service. Businesses in turn will employ fewer people because fewer are needed to supply the demand for their products.