The arrival of December means different things for different people. Nearly everyone recognizes this time as the beginning of the holiday or Christmas season. But inside the State Capitol, early December marks the time where the first piece or our upcoming session's roadmap session is unveiled – known as the November budget forecast.
State economists use this as an opportunity to tell lawmakers and the public how future state revenue collections and expenditures within our two year budget cycle are expected to fare. With that knowledge, lawmakers then use the next legislative session to either allocate any potential surplus or eliminate any potential deficit.
On December 3, we learned that we will be dealing with a large windfall.
Minnesota is now projected to have a $1.871 billion state budget surplus for the 2016-17 budget cycle. Higher than expected revenues ($42.718 billion, which is a $90 million increase over end of session estimates) combined with lower than expected state spending ($41.656 billion, or $249 million lower than previous projections) led to the surplus estimate.
Lawmakers will not be required to distribute all of the $1.871 billion windfall projection before session ends in May. According to state law, roughly one-third of that projection - $594 million – will be sent to Minnesota's budget reserves. This means Minnesota's overall reserve level increases to nearly $1.597 billion. Subtract some state payments that are also required by law, and the projected surplus allocation is closer to $1.2 billion.
Lawmakers should not view this news as a reason to go on a spending spree, as any new government spending added this year only adds to our state's future financial obligations. We are already committed to spend $42 billion over the next two years on state government programs.
This surplus announcement – while positive – does pose some questions of our current tax policy. Have hardworking Minnesotans simply been overtaxed to the tune of nearly $2 billion by their state government? The good news is we are not spending more than we are collecting. The bad news is there are going to be many lawmakers who want to use this as an excuse to increase spending just one year after we crafted our state budget.
This is a time for responsible budgeting and we need to take a serious look at all programs for efficiency and productivity. I believe there are programs that we can solidify with proper funding such as long term care and transportation. On the other hand, we can help productivity by reducing the rate and the burden of taxes on both corporations and individuals. This will only enhance our current economy.
As chairman of the Minnesota House Transportation Policy and Finance Committee I will be continuing my push to approve a plan that would increase road and bridge funding by $7 billion without raising anyone's taxes. But also near the top of our legislative priority list should be relief for taxpayers, as it's clear they are paying too much to state government.