ADVERTISEMENT

ADVERTISEMENT

Minnesota's budget surplus slips, offering cautionary tale

ST. PAUL - A Minnesota economy and state budget report is a cautionary tale. While politicians haggled over taxes and spending, pretty much every state leader reacting to information that the state budget surplus slipped from $1.2 billion to $900...

ST. PAUL - A Minnesota economy and state budget report is a cautionary tale.

While politicians haggled over taxes and spending, pretty much every state leader reacting to information that the state budget surplus slipped from $1.2 billion to $900 million said it is a sign that care is needed if budget changes are to come when the Legislature convenes March 8.

Senate Majority Leader Tom Bakk, D-Cook, the slipping budget surplus could mean major spending increases and tax cuts are out of the question.

The Friday report from Minnesota economists and finance officials "absolutely" hurts Democratic Gov. Mark Dayton's dream  of expanding classes for 4-year-olds, it hinders chances of passing a $1.4 billion public works finance  bill and makes it difficult to finance a Republican plan to increase transportation funding. Increasing state payments to cities and counties also is threatened, he said.

And Republican hopes of cutting taxes "seems pretty difficult," Bakk added.

ADVERTISEMENT

Senate Tax Chairman Rod Skoe, D-Clearbrook, added that any new spending or tax cuts must be funded before the current state budget ends June 30, 2017, instead of being phased in over time.

Skoe's comments would seem to dim prospects of a Republican-pushed plan to gradually eliminate income taxes on Social Security benefits.

But House Speaker Kurt Daudt, R-Crown, said that and other tax cuts should pass.

"Investing in our seniors in the state of Minnesota is a very worthy thing to do," the speaker said.

Senate Minority Leader David Hann, R-Eden Prairie, added that lower taxes would boost Minnesota's economy.

Minnesota Management and Budget, the state's finance agency, said the projected surplus for the current two-year budget cycle now is $306 million less than when the last update was given late last year,.

The drop was blamed on a weaker national economy. Businesses have too much inventory, state economists said, oil-related investments are down and global trade was dragging. However, consumer spending and home building were good economic signs.

State spending is falling a bit, thanks to $129 million more federal health care spending than expected.

ADVERTISEMENT

State Economist Laura Kalambokidis sketched a mixed picture of the economy.

The farm economy looks bleak, she said, after leading the state through the recession and peaking three or four years ago.

However, Kalambokidis said, economies in other countries are slowing, reducing potential markets, while corn and soybean farmers made record harvests. That combination forced prices down dramatically.

Lower oil prices are a mixed bag for Minnesota.

Kalambokidis said that low oil prices are good for consumers in two ways: good gasoline prices and lower prices on goods that use petroleum projects.

But the good oil new is offset, she said. "The negative side of oil prices is reduced oil exploration and drilling activities in the United States."

Lower national oil prices took a bigger bite out of the country's economy than expected, she said, which affects Minnesota and other states.

State economists who make budget predictions say the national economy plays a major role in how the state fares. And the state economy determines to a large extent how much tax money Minnesota government receives.

What To Read Next
Fundraising is underway to move the giant ball of twine from the Highland, Wisconsin, home of creator James Frank Kotera, who died last month at age 75, 44 years after starting the big ball.
Mike Clemens, a farmer from Wimbledon, North Dakota, was literally (and figuratively) “blown away,” when his equipment shed collapsed under a snow load.
Volunteers lead lessons on infusing fibers with plant dyes and journaling scientific observations for youth in Crow Wing and Olmsted counties.