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Forecast message: ‘We’re leaving you in pretty good shape’

Representative–elect Jim Knoblach listens to a briefing on the November Budget and Economic forecast during a House Ways and Means Committee hearing Dec. 5. Knoblach has been named chair of the committee for the next biennium. Photo by Paul Battaglia
Representative–elect Jim Knoblach listens to a briefing on the November Budget and Economic forecast during a House Ways and Means Committee hearing Dec. 5. Knoblach has been named chair of the committee for the next biennium. Photo by Paul Battaglia

A day after the release of the November Budget and Economic Forecast, the current and incoming chairs of the House Ways and Means Committee were able to share a laugh.

After the committee received an overview Friday of the projected $1.037 billion surplus for the two-year budget, Rep. Lyndon Carlson, Sr. (DFL-Crystal) and Rep.-elect Jim Knoblach (R-St. Cloud) met where the committee table curves.

“I said, ‘We’re leaving you in pretty good shape,’” said Carlson, the current committee chair. “He said it’s lot better than when he took it over a few years ago. And I said, 'Yeah Jim, a lot better than when I took it over two years ago.’”

The past three November forecasts prior to a budget-setting legislative session called for deficits of $1.1 billion, $6.2 billion and $4.8 billion, respectively.

Knoblach, who is returning to the House after an eight-year hiatus and will again chair the committee, was reserved about the forecast numbers. He called it a “little bit of a fragile forecast,” in part because analysts say the economy is slowing down, but that more capital gains revenue is predicted. “Oil prices have also gone down that might improve it further.”

Minnesota Management and Budget Commissioner Jim Schowalter briefs members of the House Way and Means Committee on November Budget and Economic Forecast on Friday, Dec. 5. State Budget Director Margaret Kelly, left, and State Economist Laura Kalambokidis, right, look on. Photo by Paul Battaglia

The twice-annual forecast from Minnesota Management & Budget provides a snapshot of the state’s economy and predicts if the state should have a projected surplus or budget deficit. The positive balance largely is a result of higher tax collections and lower-than-expected spending, especially on Medical Assistance.

[Listen to full audio of Friday's House Ways and Means Committee meeting]

MMB Commissioner Jim Schowalter warned that inflation could eat up much of the projected surplus. Under state law, inflation is included on the revenue side of the ledger, but not the expenses.

“With the forecast being as positive as it is, whatever we ultimately do on inflation, we’re able to cover it. We won’t be in a deficit,” Carlson said.

Gov. Mark Dayton will use the forecast in developing his budget proposal that must be submitted to the Legislature by Jan. 27. He indicated Thursday that a child care tax credit, rural broadband expansion, transportation system upgrades and early childhood education scholarships will be priorities.

However, a forecast to be released in late-February will guide lawmakers in making their final decisions on creating the two-year state budget that will begin July 1, 2015.

“A billion dollars isn’t what it used to be. It’s not like it’s that much money in a $40 billion biennial budget,” Knoblach said. “It’s a bit of an indicator, but we don’t have to set our budget off of it, and, of course, we won’t.”

Carlson added that the current positive outlook should help the legislative session.

“It’s tough when you start with a negative number, and you have debates about whether or not and how much revenue or whether or not how much we have in reductions in budgets and that sets the stage for a difficult session. When you have some resources on the table you can address those issues, whatever they happen to be as things unfold, without nearly the tension that you have when you have negative numbers.” 


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