Frequently Asked Questions ...

... About the Budget

What is the deal with the state budget?

By law, Minnesota must have a balanced budget. Meaning that for every cent they decide to spend, they must have the revenue coming in to pay for it. This is called the biennium budget, and is set every two years.

So what is the budget situation this year?

For the First Time Since 2007 Minnesota has a Budget Surplus! Despite the constant doom and gloom predictions of the state’s financial status, it was with some surprise that Minnesota‘s economists forecast a budget surplus of $876 million for the rest of the two-year spending cycle.

How did this come to pass?

The 2011 fiscal year closed with revenues $358 million higher than expected and expenditures $205 million below previous forecasts. With projected revenues for the 2012-13 biennium expected to be relatively unchanged and projected expenditures anticipated to be $348 million less, this will yield a projected $876 million positive balance. Much of the expenditure reductions are from changes made in the area of Health and Human Services, particularly enrollment and cost trends in the state’s Medical Assistance programs. This means the state’s public health programs won’t enroll as many people, and therefore won’t cost as much as previously anticipated.

Is this the norm?

No. This news comes after a four-year string of budget deficits in Minnesota. It was back in February 2007 that economists announced a projected surplus of around $1 billion — the last time the state was in the black. Since then, a sequence of shortfalls has drained reserves, forced reductions to almost every state service and caused elected leaders to borrow billions from public schools and private lenders.

Long-standing state statute is triggered by this surplus, which will direct the balance to the state’s cash flow account ($255 million) and the budget reserve ($621 million). If the surplus had proved larger, current statutes would have directed the additional dollars to buy-back the K-12 education shift. Despite these laws, we could still see a fight between the GOP legislature and DFL governor over how and whether to spend the surplus.

What about the overall economy?

Overall, the state’s economy has improved in recent years and is slightly outperforming the national economy. However, such positives are still offset by the tumultuous financial environment, including the debt crisis in Europe and US deficit reduction plans. Minnesota Management and Budget Commissioner, Jim Schowalter commented: “This is obviously good news and a helpful break from recurring budget gaps. It’s also a reminder that Minnesota still has some significant strengths – above average economic performance and the discipline to quickly stabilize its finances. Future risk remains, but at least we now have a cushion.” The news for now then, is at least getting better, which can only bode well for Minnesota and for Minnesotans with disabilities.