Deficit gap eases by $1 Billion; much work still to do

Sen. Roger Reinert said he was encouraged that the state’s budget deficit for the coming two years eased by about $1 Billion, but acknowledged that serious work still needs to be done to restore budget stability in Minnesota.

State spending has also decreased since the November forecast, specifically in health and human services. Additional spending declines were realized in K-12 education as well, mainly due to lower student enrollment. This resulted in a surplus in the current fiscal year of $663 million.

“We still face a huge budget gap of over $5 Billion,” Sen. Reinert said. “And almost all the new revenue is due to a delay in the capital gains tax rate increases at the federal level. This is not sustainable growth upon which the state can rely.”

The capital gains rates are scheduled to increase in two years, which is encouraging investors to turn their portfolios over more quickly now.

“Capital gains income is a small and volatile part of our state’s income tax base.” Sen. Reinert noted. “It’s not a sustainable source of revenue that we can count on during even good economic times.” State economist Tom Stinson called capital gains revenues a “slender reed” on which to base a long-term budget outlook.

Governor Mark Dayton released some preliminary budget changes because of the changed budget forecast, including dropping the income tax surcharge for the wealthiest five percent of Minnesotans, significant reductions to the proposed cuts to seniors’ long-term care which includes nursing homes and home health care, and Minnesota Care. The Governor also restored funding to community action grants, which had been completely eliminated in his original budget proposal. The Governor also plans to restore the funding for metro and rural transit to eliminate any state-imposed need for fare increases, restore cuts to fire safety training, and increase the research and development credit to promote Minnesota job growth.

“I’m glad Governor Dayton is working quickly to present budget changes that promote job growth and protect our most vulnerable citizens,” Sen. Reinert said.

Sen. Reinert acknowledged that much work remains over the next two-and a-half months to balance the state’s two-year budget.


Senator Roger Reinert
Roger Reinert represents District 7, which includes St. Louis County. He is also an educator.

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