Unexpected $876 million state surplus comes with caution
- Blog Post by:
- December 1, 2011 - 12:38 PM
Although they predict the state will end the two-year budget cycle with a surplus, the state's economic gurus are not dancing in the streets.
Still, the $876 million forecast surplus was unexpected.
"Surprise," said state finance commissioner Jim Schowalter. He said after years of bad news, it sometimes feels like the news will always be bad. "Certainly, it's a good day," he said.
The entire surplus, the state economic gurus said, is legally obligated to be used for refilling the state's depleted cash flow account, sort of like a state checking account, and its budget reserve, which is like the state's savings account. Current law, which could always been changed, allocates $255 million to the cash flow account and $621 million to the budget reserve.
Schowalter said in 2011 revenues ran better than anticipated and "that was enough" to counteract the slowing growth in the state and nation. Spending in health care in 2010 through 2013 was also lower, or predicted to be lower than anticipated.
Despite the good news, the economists said that the "economic outlook has dimmed" and slower growth was expected through 2013.
"Domestic economic and political uncertainties and Europe's sovereign debt problems have led Global Insight [the state's economic advisors] to set the risk of a 2012 recession at 40 percent," the forecast said.
Tom Stinson, the state's economist, said the state has no cushion if there is any economic turmoil.
"This probably sounds a lot like the same old gloom and doom that you've heard from me before," Stinson said. But there is some good news: the Minnesota economy is doing better than that in the nation, and the state's unemployment rate is "well below" that of the nation.
Read the forecast document:
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