OPINION: Budget forecast shows
strong growth in state's economy
Tuesday, March 05, 2013 4:19 AM
Minnesota Management and Budget (MMB), the state's non-partisan fiscal agent, recently released the official budget forecast for February 2013. The forecast provided positive news for Minnesota.
The forecast shows an additional surplus of $295 million for the current biennium, bringing the total surplus for the current 2012-13 biennium to over $2.8 billion.
As a result of this surplus, the state's cash flow and budget reserve accounts are full, and the outstanding school aid shift is down to $801 million.
The budget outlook for the 2014-15 biennium has improved by $463 million, bringing the projected budget shortfall to $627 million. This is an improvement of over 40 percent.
In addition, the long-term outlook for the 2016-17 biennium shows a projected budget surplus of $782 million.
It's important to note that the numbers for the 2014-15 biennium are projections and include automatic spending increases. If we take a closer look at the actual numbers, we will find that the state can actually increase spending by nearly $1 billion and still have a balanced budget.
Here are the numbers. The forecast shows spending of $35.159 billion in the current 2012-13 biennium. The forecast shows projected revenues of $36.116 billion for the 2014-15 biennium.
This means the State of Minnesota can spend $957 million more in the next biennium compared to the current biennium and still have a balanced budget. This is a spending increase of 2.7 percent.
Our improved forecast is attributed to our state economy doing better than expected and a decrease in government spending as a result of several government reforms that were passed by the legislature and signed into law by the governor during the past two years.
It's also important to point out that the budget forecast assumes a two-month period of time before the federal government comes to an agreement on the sequestration reductions.
According to the budget forecast, Minnesota's direct exposure to these federal cuts under the sequestration is among the lowest in the country.
If the federal government does come to an agreement within the next two months, the outlook for Minnesota would see a slight improvement.
Last month, Governor Mark Dayton released his budget, which included $3.7 billion of tax increase, the largest proposed tax increase in our state's history.
Under the governor's proposal, state spending would increase from $35.159 billion in the current biennium to $37.892 billion in the next biennium. This would result in a spending increase of $2.733 billion or 7.8 percent.
At this point, it is unclear if the governor will revise his budget proposal based on the positive news we received in the February 2013 budget forecast.
The complete budget forecast can be found on the MMB website at www.mmb.state.mn.us.