ST. PAUL, Minn. (AP) — Forget the return of deep snow and cold temperatures. The forecast Minnesota’s political class is watching this week has to do with the state budget.
Gov. Mark Dayton and the Legislature will learn Thursday whether they’ll have a projected surplus or deficit awaiting them when the 2014 session starts. State economic officials are delivering a comprehensive report on Minnesota’s economy, which will go a long way toward calibrating expectations.
Here are some key points to set the stage.
Minnesota’s tax collections have been running ahead of projections since the new fiscal year began in July — $54 million more than predicted.
Budget forecasters use economic patterns of the recent past to assess what could happen years into the future. Experts have warned that increasingly frequent political standoffs, such as the 16-day federal government shutdown in October, might dent economic growth.
What’s more, the monthly revenue updates showing strong tax collections provide an incomplete picture because they don’t include state spending trends.
An improving economy can produce millions in state savings. People who turned to government assistance programs during the recession are less reliant as they move back into the workforce, driving down one of the highest-cost portions of the budget. In the last forecast, reduced demand accounted for $80 million in lowered health and welfare costs.
By law, Minnesota’s public schools get first crack at any surplus dollars reflected in the forecast.
When the state was running deficits, it slowed down payments to schools as part of an accounting shift that helped stave off outright cuts. As conditions improved, the state has been paying down its IOUs but has more than $225 million to go before it is back on a normal school payment schedule.
Next in line for an automatic payback is a state airports account, from which lawmakers siphoned $15 million during a prior budget shortfall. The fund is used to upgrade smaller airports around the state, and is fed by assessments on plane registration and jet fuel.
Erasing the debts would be a big deal for in-power Democrats, who campaigned on doing just that. But Republicans point out that most of the payback was made based on a budget they helped enact before surrendering the legislative majority in 2012.
Lawmakers, advocacy groups and others are already jockeying in case there is extra money available.
Some tax increases approved only last spring are being pegged for possible elimination. They mostly revolve around a reconfigured sales tax. It subjected farm equipment repairs, telecommunications supplies and commercial warehousing services to the tax. Scrapping all of those would mean hundreds of millions of dollars in lost state revenue.
A lobbying campaign to give raises to personal care attendants for the frail and disabled is in full swing, attracting nods of support from prominent Democrats and Republicans. A 5 percent raise, as caregiver advocates have sought, could require $80 million a year.
Calls to provide more education dollars are always front-and-center, especially in election years.
This is the first forecast since Democrats, who control all parts of state government, passed a budget that increased spending and taxes.
Democrats are crossing their fingers that tax projections are hitting — or exceeding — their marks. Republicans will be studying the report closely for signs of fiscal weakness that they would undoubtedly attribute to Democratic policies.
All 201 seats in the House, where Democrats hold a narrow edge, are on the 2014 ballot. Dayton is also gearing up for a re-election bid.
ONE MORE CHECKUP
State finance officials will deliver another economic forecast in late February, which will be used by lawmakers to guide any budget adjustments. It also will be the last one before the fall election.
“I’m not going to submit a supplemental budget of any kind until after February,” Dayton said this week.
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