Finally, good news at the Capitol

The state expected a $1 billion deficit, but ended up with a sizable surplus.

by Dina Elrashidy

Minnesota may have an extra $876 million  on hand next year âÄî the first good fiscal news for the state in almost five years.

Lawmakers, political experts and even the stateâÄôs economist expected a deficit as large as $1 billion heading into the stateâÄôs budget forecast from the Minnesota Management and Budget office at the Capitol on Thursday.

âÄúSurprise!âÄù said MMB Commissioner Jim Schowalter, prompting laughter around the room filled with legislators, lobbyists and media. A combination of unexpected revenue and spending cuts created the surplus.

An updated forecast will come in February, but the mood at the Capitol was one of relief.

âÄúWeâÄôve now got a cushion for some of the future risks that the state has,âÄù Schowalter said.

The news is good for the University, Chief Financial Officer Richard Pfutzenreuter  said. He wasnâÄôt surprised by the surplus, but was surprised by its size.

Pfutzenreuter said the forecast may persuade legislators to continue supporting the University financially and that it âÄúcertainly helps the mood at the Capitol in regards to a bonding bill.âÄù

The Board of Regents finalized its $170 million  request for projects to the Legislature at the October meeting.

All of the extra cash will go straight to MinnesotaâÄôs savings. About $250 million will restore the stateâÄôs cash flow account. Another $621 million will beef up the stateâÄôs reserve account.

âÄúThis forecast is terrific news for Minnesota,âÄù Gov. Mark Dayton said in a statement. âÄúI am particularly pleased at our success in controlling health care spending.âÄù

Approximately 90 percent of spending reductions came in human services, according to the report. Most of that money was saved by Medical Assistance, the stateâÄôs largest low-income health care program.

Overall, MinnesotaâÄôs economy is faring better than the national economy, state economist and University applied economics professor Tom Stinson  said.

âÄúJobs and wages [in Minnesota] are growing faster than the U.S. average,âÄù Stinson said. âÄúThat is expected to continue through 2012.âÄù

The news came with reservations âÄî the announcement doesnâÄôt mean Minnesota is out of hot water, Schowalter said.

Though the forecast predicts a positive budget until 2013, the 2014-15 biennium is expected to take a dive to a deficit of $1.3 billion.

âÄúOverall, we still have issues,âÄù Schowalter said. âÄúWe still have risks. We still have concerns.âÄù

Politics as usual

In a series of press conferences after the budget announcement, the news quickly turned into a partisan issue.

âÄúWhat this proves is that controlling spending is what got us here, and weâÄôre going to continue with that,âÄù said Senate Majority Leader Amy Koch, R-Buffalo. 

Koch said that DaytonâÄôs proposed plan to increase taxes on high-income earners wonâÄôt pass because of the unexpected funds.

âÄúRepublicans took the state to a shutdown, and they really havenâÄôt fixed the problem,âÄù said House Minority Leader Paul Thissen, DFL-Minneapolis.

He said the state has issues with spending cuts which he said hurts small businesses, students and seniors.

âÄúThe budget has not been balanced for 10 years,âÄù said Rep. Phyllis Kahn, DFL-Minneapolis.

She said she hopes a $1 billion bonding bill will be passed in the next session.

Senate Majority Leader Koch said more spending is not the solution.

âÄúThis is only the beginning,âÄù she said. âÄúThereâÄôs so much more work to be done.âÄù