Black Thursday?

Last Thursday brought surprising news to Minnesotans: a budget surplus of $876 million. No one expected the budget to be in the black, most predicted a $1 billion deficit. Having a forecast in the positive rather than the negative is a welcome change. Here is a link to the forecast report. 

Looking at the forecast data, most of the increased revenue and decreased expenditure occurred in the fiscal year ending June 30, 2011 and the savings is carried forward.  That is the budget approved by 2009/2010 Legislature and signed by Governor Pawlenty.  At first look, it appears much of the savings was achieved through benefits from the Federal Health Care Act and the early adoption (and subsequent lower enrollment) of early Medical Assistance (MA) by Governor Dayton upon taking office. 

So where does the surplus go? Current law, which is subject to change, designates that this money must be placed into the state’s cash flow account and budget reserve. The cash flow account should obtain $255 million while the budget reserve will receive $621 million, still short $5 million. The state’s cash flow account is like the state’s checking account, while the budget reserve is like its savings. According to Minnesota statutes, “The budget reserve may be used when a negative budgetary balance is projected and when objective measures, such as reduced growth in total wages, retail sales, or employment, reflect downturns in the state’s economy” (16A.152 Subd. 3). 

So though a budget in the black is great news, it comes with a warning that there is a $1.3 billion deficit expected in two years and there are about $1.4 billion in payment delays to K-12 schools.  Gov. Dayton has no immediate plans to move forward with a budget until the next budget forecast is released in February.  You can get more updates and reports by following the Advocacy Department on Twitter @tchadvocates and Liking Twin Cities Habitat on Facebook.