Minnesota House of Representatives

Accessibility menu

Menu

Minnesota House of Representatives

State Representative Jeanne Poppe

487 State Office BuildingState Office Building
100 Rev. Dr. Martin Luther King Jr. Blvd.
651-296-4193

For more information contact: Sandy Connolly 651-296-8877

Posted: 2009-02-24 00:00:00
Share on: 



NEWS COLUMN

A PRIMER ON THE STATE BUDGET FORECAST



Every two years, the state legislature and the Governor are mandated to set the state budget for the next biennium. To help us do that, we utilize the budget forecast, which predicts both the revenues and expenses we can expect. To better understand this process, I thought it might be helpful to explain in more detail how the forecast is determined and how it shapes the decisions we make in setting the state budget.
Each February and November, the commissioner of finance is required to prepare a forecast of state revenues and expenditures. The November forecast in even-numbered years is used as the foundation for the governor’s budget recommendations to the legislature for the next biennium. This forecast also tells if the state is on track to finish the current fiscal biennium with a balanced budget.
The February forecast in odd-numbered years (2009) fine-tunes the preceding November forecast to reflect data that has become available since the first of the year, such as job losses that both reduce tax revenues and increase unemployment costs. Oftentimes, this new information prompts the governor to submit modifications to his earlier budget.
The November forecast in odd-numbered years (2009) and the February forecast in even-numbered years also provide updates for its current biennium. These projections will be used by the legislature to ensure that the budget for the next biennium is balanced. In some cases, the governor may make “supplemental budget recommendations" based on these updates.
A forecast may also show a shortfall for its current biennium. In this case, the commissioner of finance can reduce the budget reserve account as needed to balance revenues with expenditures. If there isn’t enough money in reserve, such as happened this past December, the commissioner may also reduce outstanding appropriations, a process known as “unalloting”. To do this, he needs the approval of the governor and must consult with the Legislative Advisory Commission. When the legislature is in session, the governor typically makes recommendations to the legislature on how to resolve the shortfall before approving use of the budget reserve or unalloting.
If a budget forecast shows a surplus, the commissioner of finance must allocate the surplus in the following order:
• to the cash flow account, until it reaches $350 million;
• to the budget reserve account, until it reaches $653 million;
• to increase the school aid payment schedule to 90 percent;
• to restore previous school aid reductions and reduce the property tax recognition shift accordingly.

Here is where we currently stand with regard to the state budget forecast: the 2008 November forecast indicated our $35 billion state budget for 2010-11 will be short by $4.8 billion. This is the starting point Governor Pawlenty used for the budget recommendations he released in January. All indications are that when the February forecast is released on March 3rd, this number could grow significantly. As a result, the Governor’s current budget recommendations will be no longer viable and he will have to submit a new one.
Last November’s forecast also showed a $426 million deficit for the 2008-09 budget. With the budget reserve account already depleted to address last year’s budget deficit, the Governor chose to unallot – reducing Local Government Aid and funding for hospitals and medical education, among others. When the February forecast is released next week, we will learn if more unallotment is needed. Considering appropriations were already cut last December, more unalloting will be extremely challenging.
Five times over the past six years, our state has faced a budget deficit. To balance one deficit is difficult enough, but when reserves have already been depleted, funding for programs cut and payments to state agencies shifted, balancing the next one becomes even more challenging. As we begin creating the next two-year budget, it will be important to work for structural balance so we can get off the deficit roller coaster we have been on over recent years.
Please feel free to contact me if you have questions or suggestions regarding our state budget. I can be reached at 1-888-682-3180 or 1-651-296-4193, by mail at 487 State Office Building, 100 Martin Luther King Blvd., St. Paul, MN 55155 or via e-mail at rep.jeanne.poppe@house.mn.

News Items

Audio & Video

Galleries

No image galleries found

Minnesota House of Representatives  ·   100 Rev. Dr. Martin Luther King Jr. Blvd. Saint Paul, MN   55155   ·   Webmaster@house.mn