Budget Debate To Heat Up As New Economic Report Sets Surplus
ST. PAUL, Minn. (AP) — The budget-setting preseason at Minnesota's Capitol is about to give way to the session's full-blown debate, helped along by an economic forecast that guides tax-and-spending parameters.
Friday's release of the comprehensive report will determine whether Gov. Mark Dayton and the Legislature still have a projected $1 billion surplus at their disposal — or if it's gone up or down since the last look in December. The forecast is the final one before the Legislature adopts a new two-year budget, probably in May.
Until now, only Dayton has put a full $42 billion budget plan on the table. In coming days and weeks, the Republican-led House and Democratic-held Senate will sketch out competing plans.
Here is a primer:
WHAT'S THE FUSS ABOUT?
Twice a year, state finance officials and economic advisers compile a raft of state, national and global economic data. Employment and wage trends, consumer spending patterns, short- and long-term fuel costs and corporate profits are among the details analyzed and turned into wavy-lined charts.
They use it to estimate what Minnesota tax collections and spending will be for years into the future, absent changes in state policy.
While it's an educated guess, the projection takes on enormous weight. When times are bad, it determines how big of a budget hole lawmakers must fill in because the state Constitution requires a balanced budget. When times are better — as they've been lately — it's the stash of money that can cover tax cuts, extra school aid or brand-new programs.
WHAT'S IN THE WIND?
Recent signs give state leaders plenty of reason for optimism that the surplus will swell.
Minnesota's unemployment rate was already tumbling when the previous economic report was done, but it's down even more lately — to 3.6 percent. Wages were fairly static at last check, but more recent reports show the strongest uptick in years. Consistently low gas prices gave people room to spend elsewhere, which could drive up sales tax collections. In January alone, Minnesota took in $85 million more in all taxes and fees than expected.
But remember, this isn't only about what has happened in the last few weeks or months. The report looks four years into the future to assess what lawmakers might be up against. Projected inflation, which has been low, is expected to creep higher in coming years. Economists are still keeping an eye on rising health care costs and an aging workforce, all of which could put additional pressure on government budgets.
WHERE MIGHT EXTRA MONEY GO?
Given the rush by interest groups to claim a slice of the previously forecast $1 billion surplus, expect a new stampede if more money is heaped on top.
Dayton will submit a supplemental budget soon. When he released his original budget, Dayton said a stronger forecast would allow him to recommend more money for long-term care and nursing homes. Local government groups are hoping he'd boost funding for municipal and county aid programs.
Some of the cash could be carved off to pay for transportation or other public-works construction projects.
Republican House Speaker Kurt Daudt said it's safe to assume that some of the surplus will be earmarked for tax relief. "I don't know what that looks like yet," he said.
Democratic Senate Majority Leader Tom Bakk said more cushion would make it easier to fit wide-ranging higher education proposals in with Dayton's focus on early learning through high school.
WHAT IF THERE'S LESS?
There are already many more requests than dollars to go around, so expectations would have to be significantly lowered.
It's a different calculation for legislators than it is for Dayton because neither majority party in the House or Senate has given a full budget rundown. For Dayton, it would be all about subtraction.
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