Publisher’s Perspective

By Tim Douglass, Publisher of the Pope County Tribune

The Minnesota Legislature has a lot on its plate for the upcoming legislative session.

First and foremost, after doing nothing last session with a giant surplus, there’s no reason to kick the can down the road this year.  The election is over.

Just how large is the surplus?  We’ve all heard the number but what does it mean?

For a state that spends around $2.16 billion a month, the amount of collected and projected tax revenue is more than the amount needed to cover current state budgetary costs – by $17.6 billion.

That’s a record. Before the latest forecast, the surplus for the rest of this two-year budget cycle and all of the following two-year budget cycle was $12 billion. And then it jumped by a third. The increase alone would have smashed records prior to 2021, it has been reported.

According to a report by Peter Callaghan of Minnpost.com, there is a disconnect between that unfathomable $17.6 billion amount and the other half of the report released in December. While taxes continue to overperform, the underlying economy – state, national and global – is getting squishier. The state’s macroeconomic vendor, IHS Markit, says the nation will be in recession soon, if it isn’t already.

“We expect unemployment rates will grow. Economic expansion will slow. Business profits and wages won’t increase as fast as the state projected just 10 months ago. Oil prices remain volatile, inflation is still high, interest rates continue to grow and Russia continues its war against Ukraine.

And still, tax revenues exceed expectations. How’s that?

According to Callaghan’s report,  Minnesota’s state budget is doing well.  Forecasts over the last three years have focused on the impacts of the COVID-19 pandemic that threw the state economy in a deep recession but turned out shorter than expected due to massive federal spending and an unequal impact on residents depending on whether they could keep working – perhaps from home – or were jobless due to forced closures.

The forecast shows the state is “settling into normalcy” after the pandemic years, according to state Commissioner of Management and Budget Jim Schowalter. But it must be a new normal because Schowalter then added of the surplus, “that’s an incredible balance any way you look at it.” At the same time that tax collections are higher than forecast, spending has fallen, especially in the state’s public schools due to declining enrollment and health services due to increased pandemic-era federal funds.

And so here we sit with an unprecedented surplus.  This session could be a time when legislators make the tax code more fair and state services more helpful, but most of us don’t count on that.

A surplus at the state level is much better than a deficit, but the political wrangling over the budget will likely be back.  We just hope legislators from both sides face things with there eyes open to what’s best for Minnesota, not what’s best for their respective political parties.

That’s a tall order, but its a new year and hope springs eternal for this Minnesotan.