Today the Minnesota Management & Budget Office released the November budget forecast. It showed a projected $876M surplus balance for the 2012-2013 biennium. This is due to revenues having exceeded the forecast by $358M while state spending was below previous estimates by $205M.
A $308 million reduction in human services spending accounted for nearly 90 percent of the decrease in the current forecast. Of which, approximately $294 million of the savings comes from lower estimates of spending for Medical Assistance. Much of the additional revenue was the result of higher than anticipated individual income tax liability for tax year 2010, partially due to an expected hike in the capital gains tax. Of the $876 million dollars, $255 million of this money has gone to fully restore the state’s cash flow account and the remaining balance of $621 million has gone to partially restore the state’s budget reserve.
“This is the first positive forecast I have received during my time in the legislature,” said Senator Roger Reinert. “It’s encouraging to see that Minnesota is finally showing signs of economic recovery.” Senator Reinert also said that, “While it’s good to know that we don’t face another major deficit this year, we need to be very cautious about calling this a surplus.” Minnesota still faces a major budget shortfall in the coming 2014-2015 biennium, when projected spending is expected to exceed revenues by $1.3 billion, reflecting the ongoing state budget structural deficit. Because the state is obligated by law to pay back the $2.1 billion K-12 school shift, the total deficit would reach $3.4 billion before inflation.
Senator Reinert urged prudence as lawmakers grapple with this news. “While we may finally have a little money in our checkbook, we need to focus on using that money to restore our savings and pay back our debts,” he contends. “Top on that list is our obligation to Minnesota’s K-12 school districts.”