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Jim Mone, Associated Press

About that state 'surplus': It's really a mirage

  • Article by: LORI STURDEVANT
  • Star Tribune
  • September 29, 2012 - 6:01 PM

Republican legislators have graciously supplied me with a new case study for the campaign manual that will someday make me rich, to be titled "How to Confuse Voters with Numbers."

First, a hat-tip to GOP state Rep. Keith Downey of Edina, who is asking voters to send him to the state Senate next year. He gave me a copy of his postsession newsletter, and I pounced on its big bold numbers:

"Minnesota Budget Turnaround. Last year: $5.1 billion deficit. This year: $1.2 billion surplus."

It's not entirely fair to pick on Downey. He's a retired business consultant known to be more attentive to numerical reality than your average Joe Legislator. He's also not alone. A lot of incumbent Republicans and their PAC friends are flaunting the same stats.

But Downey was handy, so I pressed him: "You know that there's a school shift built into the 2011 number but omitted from the 2012 side, right? Isn't that misleading?"

He quibbled, then checked, then called to concede my point but also to offer the defense that his numbers are true to current law, then and now.

On that point, Downey is right. In crafty politicians' hands, current law is a magically malleable thing.

"The shift" is Capitolspeak for delaying school payments and adjusting property tax accounting to give the state a one-time budget boost and send schools an IOU against which they can borrow to achieve full funding.

In 2010, the bulk of the school IOUs were set in law to come due in the 2012-13 biennium. That little maneuver, which suited DFL political purposes at the time, added $1.4 billion to the budget deficit that was projected at the start of 2011.

Ironically, the same trick is serving GOP purposes this year. It inflates the 2011 side of their then-and-now boast, making them sound like fiscal miracle workers for producing a $6.3 billion improvement in the state's bottom line "without raising taxes."

(In fact, their spending cuts led to fairly widespread property tax increases. But that's for another column.)

In 2011, Republican legislators and DFL Gov. Mark Dayton added another $900 million to the shift. They also repealed the 2010 IOU payback deadline, reverting to previous "current law."

That's what allows Downey et al. to claim with almost straight faces that they've engineered a $1.2 billion surplus. School IOUs are now excluded from forecasted expenditures.

But this is current law, too: Schools have first claim on any positive budget variance that exceeds the $1 billion set by law as reserve funds. And the unpaid school shift total now sits at $2.4 billion.

As long as the school shift is not fully repaid and the state's two reserve funds aren't full to their statutory brim, there is no extra money to spend or send back to taxpayers. That $1.2 billion by which projected revenues exceed expenditures through June 30, 2013 is all spoken for.

After that date comes more red ink, according to the most recent official forecast, now seven months old. A new $1.1 billion deficit will pop onto the books on July 1, 2013, unless current law is changed.

Good ol' current law helps politicians fudge that number, too. It instructs budgeteers to tally inflation in revenues but not in expenditures. Put inflation on both sides of the ledger, and the projected 2014-15 deficit exceeds $2 billion.

Pile on the unpaid school shift, as the 2010 law required, and the deficit for the coming biennium would top $4.4 billion. In other words, there's not much of a turnaround.

The "Minnesota Budget Turnaround" boast has been or will be landing in a lot of mailboxes this fall. Voters should know that its numbers tell a misleading story. State government's fiscal crisis is not over.

But the recession is. That fact says that these money woes are not a onetime phenomenon. The state has a problem with its taxing and spending patterns that goes beyond one bad recession. It's a problem that's impairing Minnesota's ability to respond to new challenges and seize new opportunities.

And a lack of straight talk by candidates about the state's fiscal fix is impairing its citizens' ability to be part of the solution.

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Lori Sturdevant is a Star Tribune editorial writer and columnist.

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