Forecast shows state budget remains steady

Minnesota finance officials said Friday the state will have plenty of money to work with in the next two-year budget cycle.

A report issued by the Department of Minnesota Management and Budget said that although the state took in less money than expected over the past few months, it has been partially offset by reduced spending. The current biennium is now projected to end with a balance of $678 million, after $334 million goes into the budget reserve.

That means the governor and lawmakers will have $1.4 billion to work with over the next two years.

Minnesota Management and Budget Commissioner Myron Frans called the bottom line number "boring," because the budget outlook is stable, lacking the big swings to the good or bad that have marked previous state financial checkups.

"At MMB my colleagues and I love boring as opposed to unanticipated deficits," he said. "We will take a boring forecast any day if the alternative is instability."

The surplus could be devoted to tax cuts, expanded preschool programs or road construction. The fate of those ideas – and much more – will be the focus of the upcoming legislative session, when DFL Gov. Mark Dayton and a Republican-dominated Legislature work on a new two-year budget.

Before you keep reading ...

Did you know that MPR News is supported by Members? Gifts from individuals power the headlines, clarity and context found here. Give during the Fall Member Drive to become a Member today.

Frans warned that a slowing national economy could mean lower tax collections for Minnesota in the future.

In reacting to the forecast, Dayton noted the turnaround in Minnesota's financial picture since he took office six years ago when there was a projection of a $6 billion deficit.  He said it makes sense to be prudent about setting the next budget.

"What this forecast says to me is that we're in a time of continued economic insecurity," Dayton said. "Obviously these projections occurred before the election, and nobody knows what those impacts will be."

Another forecast will come in February or March, and the Legislature will use that outlook to set its final budget plan. The budget must be approved by June 30 to avoid a government shutdown.

Lawmakers will also have to assess how to cover the cost of an emergency health insurance rebate for people seeing huge jumps in their monthly premiums. Dayton’s proposal for that would consume as much as $300 million.

Republicans say they want to claw back the money headed to the reserves to cut taxes. They want another pool of money, the state health care access fund, to cover Dayton's rebate plan.

"Nobody is going to get 100 percent of what they want. That’s the reality of divided government," said House Speaker Kurt Daudt, R-Zimmerman.

"We’re going to talk about our priorities which are going to be focused on helping Minnesota families, and the governor is going to talk about his priorities. Somehow, we’re going to have to mesh that together. If the governor understands and is willing to compromise, if he doesn’t walk out on Minnesotans at the end of session, then we’re going to have a successful end of session,” Daudt said.