By Rep. Paul Anderson
Now that media attention surrounding the state’s $1.87 billion budget surplus has subsided, questions are still being asked. Namely, how is the Legislature going to spend all that money? And, are residents going to get rebate checks in the mail? Well, it’s not that easy, and it won’t all get spent. And I don’t think you should hold your breath waiting for a check from the state accompanied by a note saying “thanks” for the use your money, interest-free.
First of all, the November forecast is just that, a projection of what the state checking account will look like at the end of the current two-year cycle, which ends June 30 of 2017. We had been rolling along on a streak of 14 consecutive months of above-forecast revenue coming into the state, and that’s what led to the projection of the large surplus. However, the latest actual numbers for the month of November marked the end of that streak as revenue coming in was $9 million below forecast. In the overall picture, that’s a relatively small number as it represents 0.6 percent less than projected. However, it does make one wonder if the booming state economy is slowing down. We in Greater Minnesota know full well that the ag economy is contracting, and agriculture along with its related industries account for nearly 20 percent of the total state economy.
Falling gas prices have been given credit for boosting the economy as they give consumers more dollars to spend on other items. Those prices are still dropping, with signs at filling stations now proclaiming gas for a buck-eighty-nine. However, as the new year approaches and families need to make decisions about health insurance, I think that’s going to put a damper on discretionary spending. Premiums, for the most part, have taken significant increases, and folks are scrambling to keep those costs somewhat in check. Scaled back coverage, along with higher deductibles, are two of the strategies being used to hold down health care costs.
As far as my thoughts on the budget surplus, keep in mind that the actual number is around $1.2 billion because one-third of that higher number must be set aside in the budget reserve. The two main drivers that will account for most of these funds are transportation and a tax-relief bill. When the surplus was announced last month, Gov. Dayton said the gas tax increase, which he had earlier been insisting on, was dead. That should clear the way for the two aforementioned bills to get through the Legislature and become law. Both are currently sitting in a conference committee where they were left when the last session ended. The House Republican transportation plan raised $7 billion in new spending without increasing the gas tax, and it should be the foundation for whatever comes out of that conference committee.
Regarding the tax bill, one of the main features of the plan offered by the House is a state credit to help farmers cover their cost as it relates to school capital referendums. Currently all agricultural land is levied for capital costs, with the result being a much higher percentage of capital levies being paid by those who own ag land. The House proposal would not shift any of that burden to other taxpayers, but rather would have the state paying 50 percent of those capital referendum costs currently assessed to farm land.
Those two areas should account for most of the projected surplus. In addition, there may be additional bonding projects that could be financed with cash instead of the traditional bonding process.
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