Minnesota’s Surprise Surplus

I don’t have time to analyze this in any detail because I am on deadline on a magazine piece.

But I thought I’d share this press release from Minnesota Management and Budget’s John Pollard, which tells the story pretty well. (See shaded box below.)

One thing I’d point out is that the release indicates that current law requires the surplus to be used for restoring required budget reserves. So none of the newly uncovered surplus money apparently can be used to re-fund dollars shifted away from school budgets on a “temporary” basis as part of the agreement that ended the government shutdown this past summer.

Budget Forecast Shows $876 Million Projected Balance for the 2012-13 Biennium

— Current Law Allocates Entire Balance to Restoring Reserves

St. Paul—Minnesota Management & Budget Commissioner Jim Schowalter released the November budget forecast which shows an improvement in the state’s fiscal position. An estimated $876 million dollar balance is projected for the 2012-13 biennium, all of which is used to restore state reserves.

The 2011 fiscal year closed with revenues $358 million higher than expected and expenditures $205 million below prior estimates. Projected revenues for the 2012-13 biennium are expected to be relatively unchanged and projected expenditures are anticipated to be $348 million less. The combination of these factors yields a projected $876 million balance. The majority of projected expenditure reductions are accounted for in the Health and Human Services area.

Long-standing state statute is triggered by this forecast balance, directing this balance to the state’s cash flow account ($255 million) and the budget reserve ($621 million). If the balance were larger, current law would direct the additional dollars to buy-back the K-12 education shift.

“This is obviously good news and a helpful break from recurring budget gaps. It’s also a reminder that Minnesota still has some significant strengths–above average economic performance and the discipline to quickly stabilize its finances. Future risk remains, but at least we now have a cushion,” Schowalter said.

Forecast economic growth is projected down for the remainder of 2011 and 2012 compared to the February forecast but Minnesota continues to slightly outperform the national U.S. economy.

The forecast shows a projected deficit of $1.3 billion for fiscal years 2014-15.

A complete report of the November forecast can be found on the MMB website at www.mmb.state.mn.us.

Quick addendum (3:23 p.m.): As KARE-11’s John Croman points out in a Tweet published eight minutes ago, the Department of Education has not failed to appreciate the irony of being on the short end of the surplus stick. Croman quotes Education Minnesota’s Tom Dooher:

“Schools and colleges have paid a steep price for the state to have a slightly brighter fiscal outlook.”

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