State budget not out of the woods yet

Minnesota got some very encouraging news Thursday with the latest economic forecast from the Department of Minnesota Management and Budget. The report shows the state should finish the current fiscal year in June with a $295 surplus. This money will go to the state’s school districtst to repay some of the delayed payments that helped balance the last couple of state budgets.

Better yet, the forecast said the estimated deficit for the upcoming biennum has shrunk from $1.1 billion to $627 million.

Legislators should be able to let out a cautious “Hurray!” It will be easier to plug a $627 million hole, of course, but a deficit is still a deficit, and the state should be careful how it approaches it.

Gov. Mark Dayton had proposed plugging the $1.1 billion gap by raising taxes by $2 billion, and increasing spending on some things that had been neglected in the past few years, such as K-12 education funding levels and investment in higher education. With this latest announcement he will be refiguring his budget proposal, which, like the last, is only a starting point for the Legislature.

Reaction from legislative leaders is predictable. DFL assistant House majority leader Rep. Leon Lillie was quoted as saying spending the additional money should be part of the discussion. “If there’s one thing we’ve learned in this session is that there’s so much need out there,” he said.

Republicans are warning that this is no time to start raising taxes, that the fiscal austerity of the past is starting to have an effect, and that tax increases will kill the jobs that are fueling the revenue increases.

This new forecast should not be a green light for government spending. We believe the state has an obligation to fund certain programs, especially public education, and that the state has fallen short of that obligation in the past. The state, which controls the level of reimbursement in Minnesota nursing homes and care facilities, has not been keeping up with the rising costs of care. The state must address that. But the state simply cannot allow state spending to increase at rates that outstrip the economy. We should be looking to curtail unnecessary spending as we approach the next budget.

The state should also carry on with Gov. Dayton’s plans to reform the state tax system. It needs to be simplified, and it needs to be fair. It should also provide for the state’s budget needs.

The state’s economic outlook seems to be improving, but let’s remember that forecasts are not money in the bank. Let’s be cautious as we approach the next biennium.

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