Minnesota's revenue green with no big changes foreseen

ST. PAUL – After a Thanksgiving holiday at his son’s home in San Francisco this weekend, Minnesota Gov. Mark Dayton will return to his Capitol area office Monday to start working “full bore,” he said, on crafting what is likely to be a $40 billion-plus budget to submit to the Legislature in January.
Dayton and state lawmakers will receive a revenue forecast Dec. 4 that will tell them whether they have a projected surplus or deficit awaiting them when the 2015 legislative session convenes in January.
Dayton, his staff, state finance officials and agency numbers crunchers will make thousands of spending decisions before the governor proposes a budget to the Legislature by Jan. 27, Minnesota Management and Budget Commissioner Jim Schowalter said in an interview this week.
Schowalter isn’t tipping his hand on what he thinks the forecast will say. State economist Laura Kalambokidis and the state’s Council of Economic Advisers have locked themselves in a “cone of silence” where they don’t talk to anyone, including the governor, about their calculations before they make their predictions.
But early indications suggest no radical ups or downs in the state’s tax collections or spending.
If the state had a weather ball, it likely would be wearing green, signifying no big changes are foreseen.
“We’re seeing good job growth and the economy is back on track, but it’s just not as robust as everyone would like,” Schowalter said.
During the first quarter of this fiscal year, which began July 1, state tax collections were about 1 percent less than what was projected in a February forecast.
The state heads into the next two-year budget cycle with a projected $635 million surplus, but with inflation running in the 1 to 2 percent range, the cost of funding current programs would go up about $1 billion, the commissioner said.
Dayton set out his budget priorities during the fall campaign.
At the top of his list are jobs and the economy, or, as Schowalter phrased it, “making sure people get jobs that can support families and (enable them to) engage in the economy.”
A second goal is “making sure all Minnesotans have access to opportunities” and reducing economic disparities, he said.
Another Dayton goal is improving education by, among other things, ensuring all kids can read by third grade, maintaining all-day kindergarten for all children and providing free breakfasts for needy students.
“It’s an extension of what we’ve done so far,” the governor said this week.
Schowalter called education “the core of our prosperity. It’s part of the reason for our past success.”
The governor also said he would propose a concrete plan to provide the additional $6 billion in new revenue over the next decade to fund the repair and replacement of the state’s congested and deteriorating highways and bridges. That likely means tax increases.
“I’ll put something forward that they all can scream about,” he said.
The budget-making process started months ago when the agency sent instructions to state agencies for preparing their spending requests.
While the state is unlikely to have a big surplus to spend, MMB didn’t tell the agencies what they could not seek.
“Our instructions were: ‘Give us your best ideas,’ ” Schowalter said. “We want to know what you think would be the most impactful things to improve Minnesotans’ lives. How can we do this better?”
There’s a new focus this year on plain language in budget requests. Department heads have been asked, he said, to drop bureaucratic jargon and explain proposals simply, to create more transparency and opportunities for collaboration among agencies.
“We’re asking, ‘What are you trying to get done? Be specific and clear about it so that the people of Minnesota understand why you’re trying to do it,’ ” he said.
Legislators and advocacy groups are drafting their own wish lists in case extra cash is available.
This will be the first forecast since Republicans won a majority of seats in the House of Representatives, ending two years of Democratic-Farmer-Labor one-party control of state government.
If there’s a surplus, Republican leaders would push to give most of it back to taxpayers.
State finance officials will deliver another economic forecast in February that lawmakers will use to make their final budget decisions.
In the past 10 years, the state general fund budget has increased by more than 25 percent.
The St. Paul Pioneer Press is a media partner of Forum News Service