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Minnesota budget forecast: a $1.4 billion surplus

During Friday's announcement, Gov. Mark Dayton noted there has been “a remarkable change from the period of chronic deficits.’’

The Minnesota Legislature will start its session with a projected $1.4 billion on the bottom line as they begin the business of creating the next budget.

That, of course, means DFLers, who have now managed to lose control of both the Senate and the House, have done a wonderful job of managing the state’s economy. Or, in the eyes of Republicans, it means those tax-and-spenders have been taking too much money from the hard-working taxpayers of Minnesota and that government is too big and that the sky is falling as businesses prepare to move to South Dakota or Mississippi or someplace else where taxes and wages are low.

In many ways there’s nothing more predictable than the twice-yearly announcement budget and economic forecast. No matter if there’s a deficit in the forecast or a surplus, DFLers and Republicans will find reason to fight and point fingers.

That process began on Friday.

The governor said he and DFL legislators deserve credit for a run of balanced budgets since he took office six years ago. (He didn’t mention that he was succeeding Republican Gov. Tim Pawlenty.)

“Six years ago, the forecast was a $6.2 billion deficit and a $2 billion debt to schools,’’ Dayton said. There has been “a remarkable change from the period of chronic deficits.’’

Republicans countered that Pawlenty was a victim of tough economic times nationally.

This surplus, according to House Speaker Kurt Daudt, is “a status quo forecast. We should not be congratulating ourselves.’’ The speaker said with Republicans in charge in both legislative bodies, regulations that strangle economic growth will fall by the wayside and all will prosper.

One thing the two sides seem to agree on: There will be a special session before Christmas in which the problems with skyrocketing health-care increases will be addressed, a bonding bill will get passed (remember, a bonding bill withered on the legislative vine at the end of last session) and a small tax cut will be passed.

There is importance to the budget forecast. 

  • The forecast matters because it will be the basis of how the 2018-19 budget will be built. In the current biennium, the budget is roughly $42 billion and, assuming there are no significant tax increases or cuts, the budget for the next biennium will be roughly $45 billion.
  • A surplus should make the work of the legislators and Dayton easier as they deal with the huge surge in health insurance rates, transportation projects and education spending. But, of course, nothing comes easy in government these days.
  • The state’s “rainy day fund” is at record highs. Based on this forecast, another $334 million was placed into the fund, bringing that fund to $1.9 billion, about $100 million shy of the long-term target.

The big unknown over this budget forecast is what will happen when Donald Trump becomes President Trump and the GOP has sweeping control of the national legislative process. 

Dayton, state economist Laura Kalambokidis, and finance commissioner Myron Frans all said that what happens with the Affordable Care Act, what happens with existing trade policies, what happens in areas of immigration all will have a direct impact on Minnesota’s economy.

But there were other little side events that made this forecast dog and pony show more intriguing than others.

House Speaker Kurt Daudt, incoming Senate Majority Leader Paul Gazelka
House Speaker Kurt Daudt, right, announced regulations that strangle economic growth will fall by the wayside. Incoming Senate Majority Leader Paul Gazelka is at left.

There was a long line of DFL legislators at the event ready to take questions from the media. But there were no questions for the likes of Sen. Tom Bakk and the new House minority leader, Melissa Hortman.

That was a reminder of the adage that elections have consequences. The DFLers are in the minority. What they have to say means almost nothing.

There’s also a tone from Daudt that he’s weary of Dayton’s temper tantrums. On one hand, Daudt talks of how he “works well” with the governor and “respects” the governor. But those little phrases aren’t said with much conviction.

When he speaks of Dayton’s temper, Daudt speaks with more passion. For example, Daudt was asked about Dayton walking out of a recent meeting regarding placement of Civil War paintings in the remodeled capitol.

“That’s not the first time I’ve seen the governor walk out of a meeting,’’ Daudt said, anger in his voice.  Daudt, who usually is quite controlled, went off on a long tangent about he’s been mistreated by DFLers regarding issues during Capitol remodeling.

All of this means that the budget forecast may not be as important as the political forecast, which looks rockier than usual. 

Comments (5)

  1. Submitted by Henk Tobias on 12/02/2016 - 07:09 pm.

    Why the hell would anyone

    listen to a single word Daudt says about finances. The dude was sued by his credit care company for not paying his bills. (He got the debt forgiven by a law/lobbying firm that does business with the government oddly enough) Republicans are horrible money managers and should not be allowed anywhere near state finances.

  2. Submitted by Jon Lord on 12/03/2016 - 01:14 pm.

    What Henk said

    That is historically true! They also owed a million dollars in back rent before the new renovated Capital building housed them and before Daudt took over the reigns (okay, reins) of the House.

  3. Submitted by Bill Willy on 12/04/2016 - 11:51 am.

    Excuse me, but what?

    “This surplus, according to House Speaker Kurt Daudt, is ‘a status quo forecast. We should not be congratulating ourselves.’ The speaker said with Republicans in charge in both legislative bodies, regulations that strangle economic growth will fall by the wayside and all will prosper.”

    That’s a near-perfect example of Duadt-speak. If you listen to him, it’s the kind of thing he says all the time, regardless of the topic, regardless of what question he’s asked.

    A one-point-four Billion Dollar surplus is a “status quo forecast”? . . . What does that even mean?

    We shouldn’t feel good about it or give anyone credit or congratulations for helping that happen?


    With Republicans in charge, regulations that strangle the economy will melt away and everyone will prosper?

    Which regulations? All of them? Some of them? Which ones?

    I’ve yet to hear or see Kurt Daudt, or ANY Republican, identify or lay out a list of even just the Top Ten Regulations that need to be done away with in order to unleash the dynamic power of the MN economy that will make everyone (especially everyone living “outstate”) rich. It’s always just the great generic bogeyman, “Regulations” (along with crushing taxes and out of control spending, of course — the three fundamental Pillars of Conservative Delusion) that are keeping all hard working MN families in what Kurt Daudt seems to see as abject poverty.

    I realize facts don’t matter much anymore to a lot of people, but as a quick reminder, in 2010 — the year Mark Dayton was elected Gov and Kurt Daudt gave up his job at a car dealership and became a first-term member of the House — the unemployment rate was just under 8% and, after eight years of implementing the kind of “Read our lips . . . Not a penny more!” Republican policies Tim Pawlenty, Kurt Daudt and ALL MN Republicans believe in so deeply, the state was facing a (non-status quo?) SIX BILLION DOLLAR deficit.

    The unemployment rate is 4% now.

    And, oh . . . The median household income in 2010 was $55,459.

    It was $63,488 in 2015. (Which is what? A 12% or 13% gain in five short years?)

    (It was $55,638 in Wisconsin in 2015, by the way.)

    So let’s see . . . Since Mark Dayton became Governor and Kurt Daudt quit his job at the car dealership . . .

    — The unemployment rate has been cut in half

    — The median household incomes has grown by $8,000 per year

    — A $6.2 Billion deficit has been transformed into Billion-Plus surpluses (down slightly to $900 million last year, I believe)

    — MN schools have been paid back the $2 billion they were owed

    — the (previously gutted) “Rainy Day” reseverses have been replenished

    — Year-on-year property tax increases have been stopped or slowed way down

    — Tuition at the U of M (which increased from $4,000 per year in 2002 to $12,000 per year in 2012 thanks to the Republican version of fiscal responsibility and working hard for all the hard working families of Minnesota) were frozen; and

    — Kurt Daudt’s mentor, guru, best legislative friend, David Hann (finally!) lost his Senate seat.

    So this election cycle’s news wasn’t ALL bad . . .

    But the highest ranking Republican in the state isn’t being fooled by things like the items on that list. He knows the Truth. He knows it because he’s been there, doing everything he could to stop those things from happening because he knows things like surpluses, low employment and higher median incomes are bad bad news for hard working Minnesota families. He knows huge budget deficits, high unemployment, lower median incomes, big student loan debts, general fiscal chaos and, of course, deregulation of everything in sight, are the keys to all of us prospering.

    Like he has.

    Here’s a link to an MPR article that goes into as much as anyone could find out about Kurt Daudt’s March, 2016 legal troubles related to not paying his debts or property taxes and how those things all just went away the day before session began last spring. Apparently, there’s more than one way lobbyists really CAN come in handy sometimes.

  4. Submitted by Paul Copeland on 12/04/2016 - 12:13 pm.

    No Surplus Exists

    I wish the reports on budget projections would emphasize how much MN law requires that the projections be wrong and that as a result, the projected ‘surplus’ doesn’t actually exist. An accurate projection would show that there is simply no money available for additional tax cuts or additional spending. This is all actually spelled out in the November Budget and Economic Forecast. A few quotes:

    “current law base spending amounts do not include general inflation or reflect other spending pressures.”

    “The CEA noted that Minnesota’s current practice of excluding projected changes in the prices of goods and services from a majority of the spending estimate is fundamentally misleading. It is inconsistent with both sound business practices and CBO methods and potentially encourages legislators and the public to regard the state’s financial position more optimistically than the facts warrant. The omission of inflation in the spending estimates in the February 2016 Budget and Economic Forecast understated the cost of current services as provided by law in FY 2018-19 by roughly $1.7 billion, and thus made the amount of projected revenues above the cost of providing services to appear to be larger than it actually is.”

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