‘Startling’ new surplus forecast has House committee asking how it happened

Lawmakers peppered state officials with questions Monday about a new forecast nearly doubling the size of the state’s estimated budget surplus.

Minnesota Management & Budget Commissioner Myron Frans announced Friday the February budget forecast pegged the surplus at $1.87 billion — an increase from the November 2014 forecast of $832 million.

On Monday he joked before an appearance at the House Ways and Means Committee that the surplus hullaballoo was already over.  

“You can see people leaving,” he said as people who’d come to hear the committee’s previous agenda item filtered out of the hearing room. “Friday news is old news for some folks around here.”

Rep. Dean Urdahl follows along with a handout as representatives from Minnesota Management & Budget gives their analysis of the February Budget and Economic Forecast to the House Ways and Means Committee March 2. Photo by Paul Battaglia

But committee members were eager to dig into the details of the forecast — especially to learn the reasons behind the surplus’ dramatic ballooning.

One of the answers: an anticipated post-recession rise in wages appears to finally be kicking in, filling state individual income-tax coffers.

Rep. Tony Albright (R-Prior Lake) asked about the “anomaly” of a full percentage-point jump in expected growth in Minnesotans’ wages and salaries — 4.4 percent growth estimated in November to 5.4 percent in February. “It’s startling to say the least.”

The tightening job market in Minnesota and a strong finish for wages at the end of the year account for the big jump, State Economist Laura Kalambokidis said.

Also padding consumers’ wallets: plummeting prices for fuel at the pumps.

But Rep. Frank Hornstein (DFL-Mpls) said prices have gone up again recently (to more than $2.50 a gallon) and wondered if that was accounted for. Kalambokidis said the forecast had factored in an expected rebound in oil prices over the course of the year. 

But some economic fluctuations came too late for the forecast, she said — including a downward revision in the nation’s gross domestic product on the same day as the forecast was announced.

“We couldn’t possibly incorporate it,” Kalambokidis said. The cutoff for input into the forecast comes a couple weeks before its release.

Knoblach said the committee would continue its hearing on the February forecast next week.