February state budget forecast shows small surplus

Lawmakers may dispute who can take credit, but the February budget forecast released on Wednesday, Feb. 29 nonetheless short-term was devoid of red ink — the second upbeat forecast in a row.
Because of existing state law, the $323 million budget surplus projected for the current two-year spending cycle automatically was absorbed.
“We have a zero balance again,” said Management and Budget Commissioner Jim Schowalter.
Some $5 million was siphoned to replenish the state budget reserve — the reserve is now at $653 million.
The remaining $318 million, again, by law, was directed towards reducing the school funding shifts that lawmakers have crafted in recent times as a method of balancing the state budget. Some $200 million of the repayment will be sent to the schools in March.
Still, some $2.7 billion in school payment and property tax shifts remain to be paid.
And a look out into the next spending cycle shows about a $2 billion, inflation factored, state budget deficit in addition to the borrowed billions.
But State Economist Tom Stinson said in general the economy is improving. Global Insight, the state’s budget forecaster, has reduced the possibility of a recession this year from 40 percent to 25 percent.
“Of course there are no guarantees,” he said.
Beyond possible geopolitical shots to the economy, there are a number of things on the federal level, such as the expiration of the Bush taxes cuts, that depending on how they’re handled could affect the economy, Stinson explained.
Lawmakers, like the budget numbers, were generally upbeat.
House Speaker Kurt Zellers, R-Maple Grove, while attributing the reviving state budget to hard-working Minnesotans kicking in revenue, also credited House and Senate Republicans with sound fiscal management.
“We’re excited, we’re pleased, we’re happy,” said Senate Majority Leader David Senjem, R-Rochester, of the budget news.
Zellers indicated that House Republicans were not interested in any additional state spending. “We intend to be out of here early,” Zellers said of a possible early close to the legislative session.
Zellers said House Republicans are eager to address a number of remaining issues — he pointed to the so-called First In, Last Out legislation pertaining to teacher effectiveness and layoff retention as one worthy item.
Senjem, though not suggesting how big of a bonding bill Senate Republicans wanted, indicated Republicans do want one.
But the idea that it’s possible to buy the state a new economy is foreign to Republican philosophy, he explained.
Democratic Gov. Mark Dayton explained the state had a long way to travel to get out its budget hole. Realistically, paying off the remaining $2.7 billion in shifts will take time, he explained.
Dayton, who said he will presenting a supplemental state budget within a few days, spoke of being watchful of the impact any spending proposal would have on the next spending cycle. He found it hard to believe, he said, that Republicans would take credit for the budget reversal.
“I’d say to the Legislature, ‘Where’s the jobs’ bill,’” said Dayton. “That should be the top priority.”
House Minority Leader Paul Thissen, DFL-Minneapolis, and Senate Minority Leader Tom Bakk, DFL-Cook, also expressed surprise that Republicans were taking any credit for nursing the state budget back to health.
Indeed, Thissen spoke of a perceived “giddiness” among the Republicans over the budget forecast and said it should worry the public.
On the issue of the Vikings’ stadium, the House and Senate Republican leaders have not helped move the issue along, Dayton explained.
“No one else has helped with the heavy lifting,” he said.
Stinson, in discussing the bonding bill, said that the greatest job creation impact the bill could have is if it focuses on state asset preservation.