Last week Alpha News questioned whether House Republican Leadership would break the $40 Billion mark with its biennial budget proposal. A $39.95 Billion budget target was presented by House leadership at a press conference the following day, complete with large graphs and charts showing the huge increases in state spending since 2000.
The House Republicans’ budget “target” is $39.95 Billion, and they claim a $3 Billion differential between their proposal and the $42.9 Billion budget proposal from Governor Dayton. But the reality is that the delta is closer to $2 Billion. Republican negotiations are beginning with a 3.4% increase from the current budget of $39.3 Billion.
While the $39.95 Billion listed is the proposed figure by the GOP House, a few large line items must be added back to see the real spending picture. Republicans have proposed $300 Million for the “Transportation Stability Fund” which is comprised of repurposed general funds. Ways and Means Chair Jim Knoblach, R-St. Cloud acknowledged at the budget press conference this number was not included in the $39.95 figure. The $319 Million in the “Yet to be allocated” column and an additional $100 Million in additional reserves must be added back as well.
The true Republican House figure is $40.7 Billion, a 3.4% increase in current spending. The $42.7 Billion DFL Senate proposal is just short of Dayton’s desired $42.9 Billion. The $2.2 Billion gap is close to the $1.9 projected surplus which leaves perhaps $300 Million to squabble over as well as how to spend the taxpayer surplus that came from the $2.1 Billion tax increase which hit Minnesotans with incomes over $150,000 ($250,000 for married couples.)
Minnesotans must keep in mind that inflation is used in calculating the surplus figure, while inflation is not required to be calculated into expenditures. Before 2002, Minnesota incorporated the inflation factor consistently when crafting state budgets.
Look for a compromise that results in spending going up by over 5% with wealth redistributed via tax credits to low-middle income families for education and childcare as well as potential tax cuts for businesses.
Minnesotans are in for another bulging budget that will keep the state on its current trajectory heading to a $50 Billion budget. Unlike the federal government, the state is constitutionally required to balance its budget, but we can’t print the money to do so. Keep in mind that the General fund spending discussed in this post is only part of the state budget, All-funds spending, which includes debt service, federal grants, transportation, and other special revenue is over $70 Billion for the current biennium.