Forecast is mixed, state challenges on debt ahead

Published 11:18 am Monday, March 5, 2012

Last week officials with the Minnesota Management and Budget office reported some positive news about Minnesota’s economy but also some grim news about our long-term budget debt. We have a long way to go to get our economy back on track and our state’s finances on strong footing.

The report showed an additional $323 million for our current two-year budget cycle. These added resources stem from better-than-expected general fund revenues for fiscal year 2012-13 in the amount of $93 million and $230 million less in anticipated spending from the previous forecast. Most of the spending reductions are a result of a significantly lower than projected number of enrollees currently in the early expansion Medical Assistance (MA) program for adults without children.

It is important to note that the entire balance of $323 million is automatically allocated under current law: $5 million must go to restore the depleted budget reserve account and $318 million must go to buyback the school aid shift that was part of the special session budget agreement. Unfortunately, the school payment makes up only about 11 percent in total of what the state borrowed from schools last year to balance the budget. An outstanding balance of $2.4 billion is owed to K-12 public schools into the future.

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So when you hear the state has a budget “surplus,” in reality there isn’t one. The forecast balance of $323 million is entirely obligated.

The most troublesome news from the budget forecast is that a $1.1 billion structural deficit is projected for the 2014-15 biennium. This figure does not include inflation or the remainder of the school shift buyback of $2.4 billion. The projected deficit also doesn’t take into account the sale of tobacco bonds from last session. I opposed this policy because it used one-time borrowing of $640 million — against future revenues from tobacco bonds — to balance the budget. When all is said and done, the cost to taxpayers will likely exceed $1 billion to pay off the debt and interest.

Overall, the budget forecast was a mixed bag. Minnesota’s economy is showing some signs of improvement but we have a long way to go and there is little to celebrate when one puts the state’s long-term multi-billion dollar debt into perspective.

Contact Rep. Poppe at (651) 296-4193 or 888-682-3180 or by email at