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State budget forecast holds steady, projects $1.4 billion surplus

(UPDATED)

A Republican-controlled Legislature and DFL Gov. Mark Dayton are projected to have a $1.4 billion surplus available as they craft the state’s biennial budget during the upcoming 2017 legislative session.

The November Budget and Economic Forecast, released Friday, is the second of two annual reports prepared by Minnesota Management and Budget. It painted a stable fiscal picture for the state, little-changed from the previous forecast in February.

“This forecast may sound boring to you all,” MMB Commissioner Myron Frans said during a news conference Friday. “But, trust me, in this case boring is good.”

The release of another report on the state’s fiscal health is due in late February, but Friday’s forecast release sets the stage for the governor and legislative leaders to begin laying out their priorities for the 2017 legislative session, which begins Jan. 3. Lawmakers must complete their work by May 23.

Gov. Mark Dayton addresses the media regarding the November Budget and Economic Forecast on Friday Dec. 2. Photo by Paul Battaglia

WATCH November 2016 Budget and Economic Forecast announcement on YouTube

State finance officials said the latest forecast shows a state budget that is structurally balanced, albeit hamstrung by a long period of slow-but-steady economic growth.

Lower forecast revenue projections are partially offset by reduced spending estimates, according to the report. The current 2016-2017 biennium is now projected to end with a balance of $678 million after a statutorily-required $334 million is allocated to the state’s budget reserve.

That figure, in addition to an estimated surplus in the 2018-2019 biennium that begins in July 2018 adds up to the projected $1.4 billion surplus.

MORE View the complete November 2016 Budget and Economic Forecast

State finance officials who spoke Friday warned that, despite continued growth, there are signs of risk that include a slowing national economy. That could mean lower-than-projected tax collections in future years.

Gov. Dayton and legislative leaders characterized the forecast as “status-quo.” Dayton counseled caution when looking ahead to the state’s next two-year budget, and highlighted the shift from projected deficits to budget stability during his six years in office.

House Speaker Kurt Daudt, right, answers questions — as new Senate Majority Leader Paul Gazelka looks on — regarding the November Budget and Economic Forecast on Friday Dec. 2. Photo by Paul Battaglia

WATCH Gov. Dayton's response to the November Economic Forecast on YouTube

He warned against major tax cuts, saying the projected surplus is due to economic growth and increased income tax rates on the state’s highest earners.

“We’ve gone from chronic deficits to, so far, consistent surpluses,” Dayton said during the midday news conference. “And that’s something that I intend to protect.”

Friday’s forecast isn’t cause for celebration, House Speaker Kurt Daudt (R-Crown) said. State lawmakers’ focus has been in the wrong place, he said — on getting more money into the state budget and not into the pockets of Minnesota families.

“I think Minnesotans want us to help create the growing economy that many other states have,” Daudt said.

WATCH House/Senate Republican leaders respond to the November 2016 Budget and Economic Forecast

Daudt said the No. 1 priority for the 2017 session will be finding relief for Minnesotans impacted by steep increases in the cost of purchasing health coverage on the state’s insurance exchange. But the speaker also stressed that lawmakers should focus on cutting and streamlining government to increase efficiency and make state funds available for other areas of the budget.

He echoed an earlier statement from incoming minority leader Rep. Melissa Hortman (DFL-Brooklyn Park) that many Minnesotans aren’t feeling the effects of a surplus in the state budget.

WATCH House/Senate DFL leaders respond to the November 2016 Budget and Economic Forecast

“We may have a budget surplus, but many families aren’t feeling a surplus in their own budgets,” Hortman said.

Current Minority Leader Rep. Paul Thissen (DFL-Mpls) noted in a statement: “Let’s be prudent. And let’s provide health care premium relief to Minnesotans immediately.”

Assistant Editor Mike Cook contributed to this story. 


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