Minnesota Budget Forecast December 2010
Quick Forecast Summary
● The current biennium is projected to end with a $399 million surplus.
- The Governor’s unallotment authority is not triggered.
- No need for an emergency budget balancing bill.
● The biennium beginning July 1, 2010 now has a $6.188 billion deficit.
- Deficit results from a spending increase of 27.5 percent, and
- Revenue increase of 6.6 percent.
● 27.5 percent spending increase results from many prior one-time fixes
The Forecast
The state issued its most recent fiscal forecast on Thursday, December 2, 2010. The forecast was a mixture of good and bad news. First, the good news, the current biennium that ends June 30, 2011 (FY 2010-11) is projected to end with a surplus of $399 million, up from the previously projected $6 million surplus. With the projected surplus the new legislature and Governor can enter the next legislative session without having to worry about the current biennium, thereby focusing on solving the huge challenge of the next biennium’s deficit. Additionally, with no immediate budget deficit, the Governor does not have the need or the authority to unallot state spending.
The bad news in that the projected deficit for the biennium beginning July 1, 2011 (FY2012-13) has grown to $6.188 billion. The state revenues for FY2012-13 are forecast to be $32.004 billion, a $1.510 billion or 5 percent increase from the previous biennium. State spending is projected to be $38.591 billion, an $8.324 billion or 27.5 percent increase from the previous biennium.
The 27.5 percent increase in spending is a bit misleading as it reflects many one-time measures taken to balance the FY2010-11 budget that artificially “lowered” state spending for that biennium. The $8.324 increase in spending includes:
● $ 1.456 billion from a temporary higher federal Medical Assistance match;
● $ .816 billion from one-time federal state fiscal stabilization funding;
● $ 1.900 billion from K-12 education shifts;
● $ 1.400 billion from the required K-12 shift buyback; and,
● $ .660 billion in one-time spending reductions made in FY2010-11.
These FY2010-11 fixes total $6.232 billion making the actual biennial spending growth $2.070 billion, or about 6.6%.
The next step in the budget process is the development of the Governor’s budget which will be presented to the Legislature in February. In early March the “February” forecast will be issued and then the Legislature will need to put its budget forward. The regular legislative session is scheduled to adjourn on May 23, 2010. But, special sessions can be called by the Governor after that date if an agreement has not been reached on a budget. If no state budget is adopted by the beginning of the next biennium, Minnesota state government will be forced into a shutdown (it’s actually a partial shutdown as vital services continue to be funded).
