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State Representative Andrew Falk
100 Rev. Dr. Martin Luther King Jr. Blvd.
651-296-4228
For more information contact: Jenny Nash 651-296-4122
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“THE DARK SIDE OF THE SURPLUS”
At the recent budget forecast, state finance officials announced a projected $876 million budget surplus for the current two-year budget cycle. While welcomed news, you don’t need to look far to realize the state’s structural budget is a major disaster and Minnesota is facing a sea of debt.
First of all, under current law, the entire $876 million must be used to replenish the state’s budget reserve ($621 million) and cash flow accounts ($255 million). These accounts, vitally important to our state’s fiscal solvency, were raided by then Governor Pawlenty. Only after they were depleted, was he allowed the authority to un-allot (remember that mess). As directed by current law, all of the surplus must go to replenish the depleted reserves.
So, in reality the surplus is committed and unavailable for use. State economist Tom Stinson warns with so much uncertainty in the national and international economies, there is risk the surplus will dry up before the February forecast, which will be used for any 2012 budget revisions.
What is most worrisome about the forecast is the long-term structural imbalance created from the use of one-time money and reckless borrowing to balance the 2011 budget. The state faces an estimated $1.3 billion deficit in the 2014-2015 budget — a number that doesn’t account for an estimated $1.3 billion in inflation and the outstanding K-12 school aid payment shift. The budget passed by Republicans included record amounts of borrowing from our schools by extending what’s called the “school shift" to a 40/60 level; meaning that for every dollar promised to our schools, forty cents was withheld. This amounts to nearly $3 billion.
In addition, for the first time ever, Minnesota has engaged in deficit spending by borrowing against future revenues from tobacco bonds. This “get cash now” scheme, much like a payday loan, brought in $640 million in one-time money. However, the cost to taxpayers is significant – most likely in excess of $1 billion to pay off the debt and interest. The Republicans’ insistence on using shifts and borrowing gimmicks to balance the budget was irresponsible and it led to the state’s bond rating being downgraded.
Now for the funny part. The Republicans are trying to take credit for the surplus by forcing government to “live within its means.” This is comical because the surplus doesn’t exist and the budget outlook is a disaster waiting to happen. And, much of the reason why we have a “surplus” and not a deeper deficit stems from the implementation of the Affordable Care Act (otherwise improperly labeled Obamacare). It is absurdly comical that the people who so ardently opposed the health reform law want to both “Repeal It Now” and take credit for all of the savings it has brought to our state.
The Republicans made a clear choice last session to hold money back from schools, borrow against the tobacco settlement (that was supposed to pay for the health-related costs of smoking), and impose massive property taxes increases by cutting Local Government Aid and eliminating the Homestead Credit. All done to protect those individuals (0.7%) earning more than $1,000,000 per year from paying a penny more in income taxes.
It is time for Republicans to stop patting themselves on the back and deal honestly and fairly with the long-term budget problem that remains, this is the only way we can get our state back on track and strengthen Minnesota's middle class.
Please feel free to contact me if you have any specific questions about the budget forecast or the state budget.
Rep. Andrew Falk is the State Representative for District 20A, representing Big Stone, Lac qui Parle, Lincoln, Swift and Yellow Medicine counties. He can be reached at 651-296-4228,
1-800-682-1388 or by email at rep.andrew.falk@house.mn.
News Items
- HOUSE APPROVES ENVIRONMENT, NATURAL RESOURCES & AG BUDGET - (Posted: May 20 2013 3:05PM)
- House approves HHS budget that saves $50 million through reforms - (Posted: May 17 2013 12:00AM)
- HOUSE PASSES HIGHER EDUCATION BILL FREEZE TO TUITION, INCREASE LEGISLATIVE OVERSIGHT OF U of M and MnSCU SPENDING - (Posted: May 17 2013 12:00AM)
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