Budget Update

Dear Neighbor,

The reforms we championed in the last legislative session are beginning to take root in the form of a nearly $900 million budget surplus projection announced today. This is welcome news that shows our commitment to controlling spending worked and has turned another anticipated deficit into a surplus.

It also means that Governor Dayton’s plan to raise taxes on Minnesotans is dead.

I am confident our hard-won reforms are putting Minnesota on the right fiscal path, but word of the $876 million surplus was still a pleasant surprise. The hard work and tough decisions we made this year are paying huge dividends. There are still global financial and economic factors out of our control, so we must remain focused on additional reforms that encourage economic growth, however.

State statutes require these surplus funds be used to replenish the reserve funds that have been depleted over the last few years. If the budget projections continue to improve, however, we will be able to explore topics such as accelerating the restoration of the delayed payments to education.

The Minnesota Management & Budget report below indicates our state is outperforming the nation in its economic recovery, but our projected surplus should inspire us to redouble our efforts. As a result we will continue to focus on reforms that limit government growth, fund Minnesota's priorities, and create additional opportunities for private-sector job growth in the 2012 legislative session.

Thank you for the support you have given me and feedback you have shared over the last year. The tough budget decisions you elected me to make have resulted in today's good economic news.

This is indeed a good day for all Minnesotans.

Warm regards,
Kelby

MMB NEWS RELEASE

Current Law Allocates Entire Balance to Restoring Reserves

St. PaulMinnesota Management & Budget Commissioner Jim Schowalter released the November budget forecast which shows an improvement in the states fiscal position. An estimated $876 million dollar balance is projected for the 2012-13 biennium, all of which is used to restore state reserves.

The 2011 fiscal year closed with revenues $358 million higher than expected and expenditures $205 million below prior estimates. Projected revenues for the 2012-13 biennium are expected to be relatively unchanged and projected expenditures are anticipated to be $348 million less. The combination of these factors yields a projected $876 million balance. The majority of projected expenditure reductions are accounted for in the Health and Human Services area.

Long-standing state statute is triggered by this forecast balance, directing this balance to the states cash flow account ($255 million) and the budget reserve ($621 million). If the balance were larger, current law would direct the additional dollars to buy-back the K-12 education shift.

"This is obviously good news and a helpful break from recurring budget gaps. Its 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," Schowalter said.

Forecast economic growth is projected down for the remainder of 2011 and 2012 compared to the February forecast but Minnesota continues to slightly outperform the national U.S. economy.

The forecast shows a projected deficit of $1.3 billion for fiscal years 2014-15.

A complete report of the November forecast can be found on the MMB website at www.mmb.state.mn.us.