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Minn. state budget forecast shows $876 million surplus

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Gov. Mark Dayton
Gov. Mark Dayton addresses the media at the State Capitol in St. Paul, Minn. on Thursday, Dec. 1, 2011. Dayton and lawmakers learned Thursday that the state is projected to be running an unexpected $876 million surplus.
MPR Photo/Tim Pugmire

The state's revenue forecast report shows Minnesota's budget is running a surplus of $876 million. The news is a surprise to many lawmakers who have been expecting a budget shortfall. 

The Big Story Blog is analyzing news about the state budget today.

Gov. Mark Dayton and GOP legislative leaders will use this forecast and another update in February as a blueprint to address the state's budget situation. The state constitution requires a balanced budget before the current biennium ends in June of 2013. 

The news comes just five months after Dayton and GOP legislative leaders ended a 20 day shutdown by borrowing against future tobacco payments and delaying state payments to schools. But the deal didn't address the state's structural budget problems. That would require permanent tax increases or permanent cuts in state spending.

The 2011 fiscal year balance was $526 million greater than expected, and state spending was $205 million below estimates, resulting in the expected balance of $876 million for the 2012-13 legislative biennium. 

Minnesota Management and Budget Commissioner Jim Schowalter said two factors helped create the surplus.  Health and human services spending wasn't as high as projected.  And he said the state saw increased tax collections.

"Ultimately it was a little bit bigger than we anticipated at $358 million.  That was enough to counteract the slowing GDP in the nation and the slowing GDP in the state," he said.

Zellers, Koch
House Speaker Kurt Zellers and Senate Majority Leader Amy Koch address the media at the State Capitol on Thursday, Dec. 1, 2011. Lawmakers learned Thursday that the state is projected to be running an unexpected $876 million surplus.
MPR Photo/Tim Pugmire

The forecast did not detail reasons for the lower spending, and the forecast wasn't all sunny. It projected a deficit of $1.3 billion for fiscal years 2014-15.

The Legislature convenes Jan. 24. The economic forecast will be updated again in February, when it will be used to guide Dayton and political leaders in budget talks.

Legislative sessions held in even-numbered years have typically only dwelt on budget issues in the event of deficits. Unless the February forecast reverses the surplus, lawmakers and Dayton could avoid a clash. It might even leave breathing room for a rare early adjournment of the Legislature, given that all 201 legislative seats are on the ballot next November and lawmakers will be scrambling to adapt to new turf created by the once-a-decade redistricting process.

Supporters of public funding for a new Minnesota Vikings stadium are likely to relish Thursday's news, given previous fears that another state deficit would make it hard for lawmakers to back state money for a private businessman's project. While stadium supporters had been hoping for a special legislative session for a stadium vote prior to Jan. 24, the forecast lack of a looming deficit will leave much more room for stadium politics in the regular session.

The last budget forecast, in February 2010, presented Dayton and lawmakers with a $5 billion projected deficit. It eventually led to a months-long standoff between the Democratic governor and Republican legislative leaders.

By law, surpluses are supposed to go into two state funds: a budget reserve and a cash-flow account. It's the first state forecast to cough up a surplus since 2007, as the state reeled from the national recession.

The Associated Press contributed to this report.