Don't get too excited about budget surplus
We're all for giving credit where credit is due. But we're wary to share in Governor Tim Pawlenty's revelry about the budget surplus he's touting. Tuesday, an economic forecast predicted a surplus of $181 million through the 2007 budget period. P...
We're all for giving credit where credit is due. But we're wary to share in Governor Tim Pawlenty's revelry about the budget surplus he's touting.
Tuesday, an economic forecast predicted a surplus of $181 million through the 2007 budget period. Pawlenty patted himself on the back quite publicly, calling the budget news the "largest turnaround in the state's financial history." (The state had a $4.5 billion deficit in 2003.) It's true - as a state, we've come a long way as a state toward fiscal responsibility.
But don't get too excited just yet. First of all, though it sounds like a lot of dough, realize $181 million from a $30 billion budget is, relatively, small potatoes. It's like investing $2 and earning 1 cent in interest. Besides, in November, the surplus was estimated at more than $700 million, so this new figure is a bit disappointing.
Secondly, we must understand this potential surplus depends on revenue from the 75-cent-per-pack "health impact fee" imposed on cigarettes, the legality of which was questioned in district court in December. Though the state is still collecting the fee, the funds are being held in escrow in anticipation of a Supreme Court appeal, scheduled for April. We should not count on that money.
Also, the state's economic growth is slacking behind the rest of the country. Job growth is also slow, and income, sales and motor vehicle tax income is down slightly from the original November forecast. According to the Department of Employment and Economic Development, the unemployment rate averaged 4 percent in 2005, which is actually the lowest it's been since 2001. (Hubbard County's 2005 average rate was 5.3 percent.)
There is definite room for optimism. Minnesota's budget reserves are once again at a healthy level ($1 billion). Corporate sales tax receipts are up. And don't forget the millions of dollars that were promised to repay school districts and local governments from which the state "borrowed" to avoid past deficits. A lot of that money has already been distributed, the rest to follow in May.
The Legislature went back to work Wednesday. Let's hope our lawmakers can find a renewed sense of comradery and creativity to not only avoid another special session, but to prioritize tasks and ensure the budget surplus - however small - is just the beginning of a long, positive trend for Minnesota's pocketbook.