Last week, the legislature convened a meeting of the Subcommittee on a Balanced Budget (a subdivision of the Legislative Commission on Planning and Fiscal Policy). This new subcommittee, created in the wake of last month’s Leadership Summit, is charged with setting up a “framework” for addressing the state’s long-term budget challenges.
In their first meeting, the members reviewed much of the information covering during the Leadership Summit, including an overview of the state’s economic challenges (from state economist Tom Stinson and state demographer Tom Gillaspy) and the state’s budget challenges (from Senate lead fiscal analyst Matt Massman and House chief fiscal analyst Bill Marx). The information-packed handouts are available on the committee’s website.
There were a few things that struck me as either new or interesting:
- In considering the projected budget deficit for the next biennium, FY 2012-13, keep in mind that the forecast already assumes that revenues will increase by 10 percent over the FY 2010-11 biennium. So, said Stinson, if we think a strong economic recovery would allow us to “grow” our way out of the budget deficit, we need a reality check. The recovery is already factored into the forecast. In order to balance the budget through economic growth, revenues would need to increase by 25 percent between FY 2010-11 and FY 2012-13. In other words, we cannot grow our way out of deficits, we will need to make some fundamental changes.
- Minnesota’s Price of Government (or how much of our personal income goes towards paying for all state and local government) has declined. Back in the early 1990s, Minnesotans were paying close to 18 percent of personal income for all state and local government. That percentage has dropped to less than 16 percent. Stinson pointed out that if Minnesota was spending at the same level of personal income as we were in the mid-1990s, we’d have about $4.4 billion more in revenues available right now.
And legislators also engaged in a little political sparring with Tom Hanson, Commissioner of Minnesota Management and Budget:
- Apparently, some in the legislature feel that there is no legal authority for the Governor to pay back the shift in education funding that he implemented through unallotment. Senator Larry Pogemiller pushed Hanson on that issue, arguing that there will need to be authorizing legislation in order to “pay back” the shift.
- Pogemiller also warned Hanson that when the legislature reconvenes next February, the Governor should be prepared to present a proposal for balancing the budget all the way through FY 2012-13. Hanson responded that he’ll carry their message to the Governor, but the easiest answer would be to just continue the Governor’s unallotments, including the shift in education funding.
- Senator Dick Cohen asked whether the Governor was considering another round of unallotments if the November Forecast shows a new deficit. Hanson answered that the idea hasn’t come up and they are busy preparing a supplemental budget to be introduced in the 2010 Legislative Session.
Two additional meetings of the Balanced Budget Subcommittee have been scheduled:
Thursday, November 12, 9:00 am – 12:00 pm, State Capitol Room 15
Thursday, December 10, 9:00 am – 12:00 pm, State Capitol Room 15