A Minnesota-rousing cheer is in order. Propelled by a rebounding Minnesota economy, the state budget has surged deep into surplus territory. Officials announced on Thursday that $1.09 billion more than originally expected is now foreseen on the biennial bottom line come June 30, 2015.
Not since 2006 has a mid-cycle forecast looked this good. Remember 2006 — the year before the housing market tumbled, and two years before the Great Recession's full force hit?
We hope state lawmakers do. They were busy congratulating themselves Thursday for their parts in producing the state's newfound fiscal health. DFL Gov. Mark Dayton was magnanimous enough to acknowledge that Republican legislators' spending restraint in 2011-2012 had something to do with the positive bottom line.
Dayton took the lead in suggesting good uses for the $825 million that remains on that forecast bottom line after the last of the state's Great Recession obligations to schools is subtracted from the books. First on his list, and deservedly so, is the repeal of three ill-advised sales taxes on business services, for equipment repairs, third-party warehouse services and telecommunications equipment. To his credit, he's also interested in proposing a $205 million tax cut for low- and middle-income families, if the surplus forecast holds up when revised in late February.
But Minnesota Management and Budget Commissioner Jim Schowalter allowed that he remembers 2006, and how quickly that December's $1.04 billion surplus evaporated in the months that ensued. Schowalter counseled against committing the entire $825 million to recurring tax cuts or spending.
"I would proceed with caution," he said. "We are very early in the biennium. We know that there are a lot of uncertainties out there. And we want to make sure that any changes we do make are sustainable. That's going to require the consistent fiscal management that has gotten us to this place."
"Consistent fiscal management" is Capitol code for maintaining a substantial reserve fund and the capacity to delay school payments, an option that functions as an unofficial fiscal safety valve for state government.
After an upturn started in 2012, lawmakers did well to promptly refill the state's official $1.01 billion reserves (the combined total of the rainy day fund and a cash flow account) and restore school payments and school property tax bookkeeping to their normal schedules.