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State Representative Joe Hoppe
100 Rev. Dr. Martin Luther King Jr. Blvd.
651-296-5066
For more information contact: Jodi Boyne 651-296-0640
NEWS COLUMN
BUDGET FORECAST SHOWS A SURPLUS AND A DEFICIT
The 2005 legislative session began January 3 with both parties in the House and Senate advancing ambitious goals. All of our goals, from tougher sex offender sentencing to more money for education, will be looked at through the filter created by the latest state budget forecast, which shows bad news in the current budget cycle, but good news for past budgets that can help guide us through this year’s budget deficit.
State economists predict a $700 million budget deficit for 2006-2007, plus inflation. The cause of the deficit is not a problem of too little money coming in. In fact, revenues are predicted to be up over the next two years. The problem is – and this is what creates the deficit – spending is predicted to increase by 7.6 percent, more than twice the rate of revenue increase.
Most of the increase comes from skyrocketing government health care costs. We will spend a whopping $1.4 billion more on health care in the next two years than we spend now ($7.2 billion in the 2004-2005 budget). That’s a 20 percent increase! At this rate, we would have to double income taxes every eight years just to keep up. Clearly, we cannot sustain this kind of spending.
There is no shortage of suggestions on how we should solve this problem. Some say we need to raise the gas tax, which has been set since the late 1980s. Others say a higher cigarette tax would help solve the budget problem and discourage kids from smoking. Still others say we should not cut spending at all and raise everyone’s income tax by 5 percent. It is too soon to rule out any possible solution and raising the gas tax may get serious discussion this year, but raising the income tax is almost entirely out of the question. Even Senate Democrats, who are usually not shy about their desire for higher taxes, say they don’t have the votes to take more money from your paycheck. I don’t support higher income taxes and if some of the most liberal elected officials in the state agree with me, it is a safe bet that your income taxes won’t go up this year.
But lost in the news of another deficit is some very good news about the 2005 state budget. When legislators set the budget in 2003 we faced a projected deficit of $4.2 billion. We chose not to raise taxes and made some tough spending decisions. Not everyone was happy. But look at what happened: The 2004-2005 biennium – which started with a huge deficit – will end with a $495 million surplus. That’s quite a turn around in just two short years and should serve as a guiding example when we attempt to solve the next budget deficit.
It is easy to think we should use the current year’s surplus to pay down next year’s deficit, but state law requires us to spend the money is a certain way. First, we must fund the budget reserve to $650 million and rebuild the state’s cash flow account to $350 million. With what is left, about $118 million, we are required to buy back some of the education shifts used to balance previous budgets.
Like 2003, 2005 will be a long, busy and contentious session. Groups on all sides of every issue will do everything they can to make their voices heard. I encourage you to contact me with your thoughts, ideas, questions and concerns. You can contact my by phone at 651-296-5066. You can also email me at rep.joe.hoppe@house.mn. Or, if you’re in St. Paul, feel free to drop by my office at 537 State Office Building, right across the street from the State Capitol.
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