Thursday the Minnesota Office of Management and Budget released the semi-annual State Budget and Economic Forecast. The forecast projects collecting $1.54 billion over authorized spending in the next two-year budget cycle. In accordance with state law 1/3 of that surplus ($491 million) is transferred to the state’s reserve fund, which now is at a record high of more than $2 billion.
Indications continue to point to a significant structural surplus moving forward into the states’ next two-year budget cycle, which begins July 1 of 2019. That surplus is continued evidence that the common-sense approach to grow Minnesota’s economy is working. Minnesota’s unemployment rate remains at an 18-year low, job vacancies are on the rise as employers struggle to find qualified workers and after years of flat wage growth, wages are beginning to rise.
Holding state spending at a reasonable level and reducing taxes on individuals and businesses has proven to be positive for Minnesota’s economy. Some are now advocating abandoning that approach and replacing it with significant increases in both taxes and state spending. I urge caution.
Minnesota taxpayers continue to pay significantly more in taxes than state government is authorized to spend. With the continued collection of excess tax revenues and the state’s reserve account at a record level, I believe there remains room for additional individual and business tax relief, while at the same time properly funding state government.
The future is not without risk. Our state’s agriculture and forestry sectors continue to labor under the pressure of uncertain market access and low commodity prices. The full impact of the federal tax cuts remains to be seen. We live in a global economy with exposure to world events over which we have no control.
On a more positive side, over the past 12 months we have seen the number of job vacancies rise and remain above the number of individuals on unemployment. Our nation and Minnesota have broken out of a period of stagnant economic growth.
Now is not the time for major spending spree or expansion of government, nor can piling on a batch of tax increases be justified. As we begin to shape the details of the next two-year state budget, the order to the helm should be “steady as she goes.”