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Projected budget surplus swells to nearly $1.9 billion

Minnesota Management and Budget Commissioner Myron Frans
MinnPost photo by Briana Bierschbach
Minnesota Management and Budget Commissioner Myron Frans

Minnesota’s budget surplus has swelled to nearly $1.9 billion, setting off the debate in St. Paul about what to do with the extra money next session. 

In an early release Thursday, state budget officials said the forecast improved from previous estimates “despite a weaker economic outlook.” The surplus has grown by $1 billion since lawmakers adjourned last spring, leaving $865 million on the bottom line. Law requires nearly $600 million of the surplus to go automatically into the state’s budget reserves, leaving about $1.2 billion of the surplus available to legislators next session.

In spending the extra cash, many lawmakers want to pick up where they left off earlier this year, when Republicans in control of the House and Democrats in control of the Senate clashed over spending the surplus on tax cuts or approving new funding for transportation. Gov. Mark Dayton has said he will renew his push for universal preschool in Minnesota.

Senate Republican Minority Leader David Hann was the first to respond to the budget forecast, calling for lawmakers to “immediately” approve a GOP-backed spending package for roads and bridges put forward last session and “give the rest of the surplus back to taxpayers.” This week, advocates for long-term caregivers and those who care for people suffering with mental and physical disabilities asked lawmakers for $90 million to boost worker pay.

Republican minority leader David Hann
MinnPost file photo by James Nord
Sen. David Hann

The November budget forecast is an early indicator of how much money lawmakers will have to spend next year. Dayton will start drafting his budget plan off of the November forecast, but lawmakers will work off of an updated budget forecast that’s released in February. The 2016 session will convene on March 8.

State economists, budget officials and lawmakers will address the projected surplus Thursday afternoon. Check back at MinnPost for updates. 

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Comments (9)

Stop taxing SS!

Let's remove MN from the list of 13 states that tax SS! It represents another format of double taxation since we paid taxes before we paid our FICA...

You mean a tax cut?

Don't you understand? This is Minnesota.

We overtax and then spend it. If we give a "tax cut" it is very targeted to people who do not pay taxes to begin with or spend it yet again on the trickle down education monopoly.

Who cares about double taxation when it comes to taxes in MN. Double taxation through your estate or by taxing SS is considered "paying your fair share in MN."

Budget Surplus

Bank it for a rainy day because this is a projection there is not one red cent in the bank yet.

Surplus

Let me give another bump to banking it for a rainy day. We've only recently clawed our way out of a horrifying recession, one that some people are still recovering from. Giving that banking laws have not changed one iota, it's only a matter of time before we have another serious downturn. It's better to be prepared and have a couple of bucks in our back pocket.

If people do insist on spending some money, new roads and bridges are not the way to go. We already have an enormous backlog of roadworks that need to be prepared without adding to the list. Get what we already have fixed and then we can talk about adding new ones.

If people are looking at roads and bridges as an employment boost for rural Minnesota, a much better proposal would be to extend decent broadband internet access state-wide. That'll help businesses compete much better than a freeway they don't need and will give them access to markets world-wide as well as top notch employees.

Revenue base

Amen to Mike Downing on SS taxes. Qualified amen to Mark Hayes. If we don't really have one red cent in the bank yet, and we don't since this is just a forecast, "banking it" seems just as premature as "spending it."

I'm happy to see a healthy portion of the projected surplus go into a rainy day fund. Aside from death and taxes, one of the constants in our economic history is that upturns are followed by downturns. I'd prefer not to have to eliminate or starve numerous programs because the economy has gone south. Beyond that, my preferences lean toward the non-sexy expenditures necessary to maintain the infrastructure we already have, though, as a grandparent, I'd be fine with funding of the Governor's universal preschool idea. Even with that, however, the mantra ought to be "save first," then spend.

Mr. Hann's political grandstanding about "giving it back to the taxpayers" is a non-starter in this household. My standard of living is not going to be significantly affected by a check from the state for $25, or even $250. I'd rather have roads in better shape, potholes filled, water and gas lines that don't leak, sewage systems that work, etc. All of those things affect my life and health much more than getting a relatively minor amount of tax money refunded to me personally.

That said, if the trend toward surplus continues for another year or two, then Mr. Hann's suggestion moves from political grandstanding to plausible policy proposal, though I'm well aware that the Minnesota legislature went overboard some years ago and made permanent reductions in tax rates that came back to bite Minnesotans in the posterior. Perhaps tax-reduction legislation, should it prove reasonable to write such law, should be written with some revenue "triggers" built-in that would provide for tax increases if economic indicators, such as a surplus, show that the economy is no longer humming along, but is instead choking on… whatever it might be. The idea is to avoid the previous situation, wherein a slump in the economy ended up crippling the state and its functions.

The State should fund it's portion of Southwest LRT

Only the 20% funding commitment from the State is missing, as the federal government (50%), County Transportation Improvement Board and local communities along the line (30%+) have all made their commitments to this important regional product. It's time for the State to commit its share so that the project can be built without further delays, especially since it has the funds.

The economic development that will be fostered by this project, in addition to service to the 36,000 commuters a day that will ride the rails, make this a worthwhile public investment (much more so than the State funding for the Minnesota Vikings football, which required a larger State investment and was made with support of both political parties.) This is what our State government does well, build infrastructure, and the jobs and leveraged economic development that comes from such investment is in all of our interests.

Shades of 2007?

My continuing obsession with the continuing absurdity of the Polymet proposal (and the serious and growing problem on the range), led me into looking at the "financial viability" end of things over the past week or two.

Won't go into all that, but, in a nutshell, it looks like the "global commodities bubble" burst (completely) somewhere around early to mid-September, and appears to have been rooted in the same kind of thing what was happening in 2007 and 2008, just before the real estate bubble burst.

Everybody in, and affected by, the minerals sector of global commodities is scrambling. China, which consumed 50% of those minerals in it's recent massive building spree (they built as much stuff - infrastructure, factories, buildings, housing, etc. - in seven years as the U.S. built in the past 100 years), has, as one commentator I read put it, "built their last possible bridge to nowhere and, for now, is done done done," buying copper, iron ore, everything. And that has thrown Commodities World into a "severely over-supplied" tailspin that is causing the unemployment crisis on the range (and a lot of other places around the world).

Anyway... When it comes to the standard Republican economic vision, as Ray pointed out, and as many will recall, the (billions of) "Give it all back!" tax cuts at the end of Bill Clinton's presidency, coupled with T. Pawlenty's and Republican's Absolute Refusal to raise (or adjust) taxes in any way (and their basic gutting of state reserves) led to more than a decade of budget deficits, sky rocketing ("non-state, but local") property taxes, with all of it culminating in a $6.2 Billion deficit in the 2010-2012 biennium (at the end of which Republicans were - rightly and finally - voted out of power).

And when it comes to potential economic downturns, the spooky state of the global commodities markets (and their poor prognosis); the similarities to the real estate catastrophe that started in 2007 and blossomed 2008; the immediate real world situation on the range (which will be getting worse and won't be ending anytime soon, Polymet or no Polymet); make the idea of beefing up the state's reserves seem like a sound, potentially timely, idea.

"The state should have $2.0 billion in its budget reserve to be able to meet the needs of Minnesotans in tough economic times. That's according to Minnesota Management and Budget's (MMB) most recent Budget Reserve Report. . .

"Currently, the state has $994 million in the reserve, or under half of the recommended target."

www.minnpost.com/minnesota-blog-cabin/2015/10/new-report-shows-minnesota...

That's from an Oct 23 MinnPost article.

This article said, "Law requires nearly $600 million of the surplus to go automatically into the state's budget reserves," which will bring the total to just under $1.6 billion, and that means it would "only take another" $400 million to "git 'er done," and put the state in better shape to handle the next downturn which, as quite few folks on the range might tell us, COULD be closer than many of us may be thinking right now.

And, as a bonus, that would still leave an $800 million surplus for everyone to demagogue, squabble, and pose for voters over.

Agreement with

Readers Downing, Hayes, Adler, and Mr. Willy's comments about adding to the budget reserves. Well said! Please tell your legislators the same thing.

So You Want

Those of us raising the next generation of tax payers, with our declining real incomes, to pay more in taxes? I just want to be clear, because if someone pays less, someone has to pay more. Or you can propose offsetting budget cuts, and name specific programs, because there is no Dept. of Waste, Fraud and Abuse. We are already paying SS payroll taxes at a higher rate than those currently collecting SS retirement.