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Legislative News and Views - Rep. Bob Vogel (R)

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My perspective on the state's new economic report

Friday, March 3, 2017

Dear Neighbor,

Minnesota Management & Budget on Tuesday issued an updated state economic forecast, providing the essential information we need to formally start the process of establishing a new two-year state budget.

The top-line numbers from MMB project a $1.65 billion surplus through the 2018-19 biennium, which is a net increase of about $250 million over the previous full forecast issued in December.

Tax revenues actually are forecasted to be $321 million more than the November estimate. Nearly 81 percent ($274 million) of the increased tax revenues are from individual income earners. But the $321 million in revenue growth is offset by $156 million more in spending than projected, which includes $95 million in E-12 education and $73 million in health care.

An improved U.S. economic outlook and positive numbers for key economic data such as personal income growth, employment, and consumer spending have contributed to the additional surplus revenue.

Overall, including the planning period, Minnesota's budget is structurally balanced, with a $2.1 billion surplus projected for the 2020-2021 biennium.

This is good news and I am pleased to see our state has a healthy bottom line, but we still must exhibit caution as we assemble a new two-year state budget this year. For one thing, MMB indicates significant risks remain, especially with uncertainty in international trade and health care that could impact us.

Furthermore, projected revenue is far more subject to change compared with projected expenditures, which tend to come true in good or poor economic times. So the bottom line in looking at the projecting is always to remember that the state already has made commitments to future spending, while the revenue required to fund those obligations is based on an element of speculation.

What this means is that we will be best served when we set a responsible total spending amount in our new state budget so we mitigate our exposure to unanticipated changes to keep us on a steadier course, as well as serve the taxpayers’ needs.

Look for more on the budget as news warrants. Also, bills I have authored continue making their way through the legislative process. Those include separate pieces of legislation to bring transparency to franchise fees cities charge citizens, implement standards for the state’s payment on debt service and to help protect local auto dealers’ franchises. I will pass along more on those as things develop.

As always, your feedback is welcome on the issues.

Sincerely,

Bob