A legislator wants to use a big chunk — $435 million — to further shore up the state’s rainy-day fund, a frugal position that is likely to be met with resistance from those who have other plans in an election year.
State Rep. Clark Johnson, DFL-North Mankato, has proposed that the Legislature fully fund state officials’ savings goal of $2.1 billion, or roughly 5 percent of general fund revenue.
“You save in good times, and you draw down your savings in bad times,” Johnson said of his proposal. “That’s the point of it — these are good times.”
A September report by Minnesota Management and Budget (MMB) said if their budget target is met, there’s a 95 percent level of confidence that the rainy-day fund would be enough to cover a future budget deficit. The updated recommendation, the result of work by MMB and University of Minnesota economists, used a pioneering model that accounts for the state’s volatile tax base.
The second-term DFLer said legislators should think ahead and work to cushion the blow from a future economic downturn that may drag down the state budget. His proposal comes as the state has seen its fiscal picture improve greatly. Minnesota’s rainy-day fund currently stands at $1.9 billion, the result of a recent law change requiring that a third of the November forecast balance be automatically transferred to the state’s budget reserves.
In recent years, the state repaid schools after borrowing from K-12 education to balance the state budget. The budget surplus stands at $1.9 billion, though a third of that has already been diverted to the budget reserves, leaving lawmakers $1.2 billion to work with in the upcoming legislative session.
Johnson, elected in 2013 as the state’s budget was still shaky, said he ran for office in part to counter what he called irresponsible budgeting practices. He criticized the state’s borrowing from schools to plug a budget hole. He said a robust budget reserve would help prevent similar budget maneuvers.
His proposal likely will be met with skepticism. House Republicans, for instance, are proposing hefty tax cuts in the upcoming session. Senate DFLers also have plans of their own, including property tax reductions for homeowners.
House Taxes Committee Chairman Greg Davids, R-Preston, said it’s unlikely Johnson’s proposal will succeed, partly because of the various proposals for how to spend the projected surplus. “Legislators want tax relief, and there are those that want spending, and that takes away from both sides,” Davids said.
He added: “I think our reserves are quite healthy.”
Johnson, however, said he believes there will be sufficient surplus dollars to fund different legislative priorities.
“This doesn’t preclude many of those plans,” Johnson said. “One could imagine tax cuts … a lot of that could go forward.”
Acknowledging the difficult case of shoring up the rainy-day fund, Johnson said “sound policy is also sound politics … that’s a pretty compelling case, I think.”