Forecast: State budget deficit drops
Lawmakers, officials call news ‘a good day for Minnesota’
ST. PAUL — Minnesota House Speaker Paul Thissen, DFL-Minneapolis, and House Minority Leader Kurt Daudt, R-Crown, each described the $463 million budget deficit decrease announced Thursday with the release of the February Economic Forecast as “a good day for Minnesota.”
But that’s where their agreement ended.
Thissen said the $627 million projected budget deficit — down from the $1.1 billion deficit in November’s budget forecast — was an improvement, but it was important “to get the budget square before moving forward.” He also said the forecast was an opportunity for the state to look ahead “for the first time in a long time” and start making the kinds of investments in education and property tax relief it needs to position itself for the future.
Daudt said that, despite the decrease, the Democrats were still proposing the same $3.7 billion tax increase they had been before and weren’t talking about further cuts but saying instead, “we can spend a little bit more here or we can spend a little bit more there.”
For his part, Gov. Mark Dayton said the $627 million deficit now projected for the next biennium was about one-tenth of the $6.1 billion budget deficit predicted for the next biennium when he took office in January 2011.
“That’s progress,” Dayton said. “Next month, we will pay another $290 million over to our school districts from previous borrowing. We’ve now repaid almost $2 billion of that debt in the last year. That’s progress.”
That payback of money schools are owed because of funds shifted to balance the budget in previous years is mandated because the state’s General Fund revenue for the 2012-2013 biennium is now projected to exceed November estimates by $217
million, while spending is now forecast to fall $63 million below prior estimates.
State Economist Tom Stinson credited an improved national economy — as well as an acceleration of revenues into 2012 as people moved forward salary bonuses, for example, as a way to avoid perceived tax increases in 2013 — for the revenue increase.
Dayton said he has not yet made plans for how to handle the $463 million improvement, but expects to propose, when he releases his revised budget proposal the week of March 11, “that most of the money be returned to Minnesota taxpayers in additional tax reductions.” He mentioned upfront exemptions from sales taxes on capital investment by businesses and an increase in the renter’s tax credit as measures under consideration.
Schowalter said that while the forecast is good news, “it doesn’t take care of the underlying problem,” and that Minnesota is still challenged to reach structural economic balance over the long-term. He noted that although the forecast predicts the state’s revenues for the 2016-2017 biennium will exceed its expenditures, that is before inflation is factored in. When inflation is included on the expenditure side, there would still be a deficit of about $1.5 billion in the next biennium.
As for more near-term concerns about the impact of the federal government’s sequester, due to take effect Friday, Stinson said Minnesota would not be hurt dramatically. Global Insight Inc., the company Minnesota consults with on its economic forecasts, predicts the sequester will last two months, according to Stinson. However, even were it to last an entire year, Stinson said Minnesota would lose about 5,000 jobs from its predicted growth rate.
“The fiscal cliff was averted and converted into a set of lesser problems that should not derail the modest growth that we’re projecting,” Schowalter said.
Stadium revenues revised again
Not all the news from the forecast painted an optimistic picture, however. Revenues from the so-called “e-tabs” being relied upon to fund the new stadium to house the Minnesota Vikings were once again revised downward. Previous estimates called for 900 sites to offer e-tabs by Feb. 1, and instead there are only 130, Schowalter said. The forecast also reduces the expected net revenue, per site, from $206 to $100.
Dayton emphasized the gap in revenues from what was expected to what is now projected is $13 million for the next two years, describing that as “not an insurmountable problem,” and pledging to work with legislative leaders to solve it.
Jonathan Mohr is a writer with the Minnesota House Information Service