Minnesota’s next governor will face a major problem when he takes office: the deficit.
For his part, Independent Tom Horner says that, despite projected increases in revenue, the state won’t have any extra cash.
“We don’t have $2 billion extra,” he said during the Sept. 7, 2010, debate in Duluth in response to his opponent Republican Tom Emmer’s claim that the state will be working with a revenue surplus next year. “[The state] already spent it.”
Horner’s claim is on the money.
It’s true that the state will have more cash in the next biennium. According to Management and Budget, revenues are projected to increase from nearly $31 billion to about $33 billion – roughly a 7 percent increase.
But revenue only tells one side of the story, as Horner points out.
In the next biennium, spending is slated to increase to $38.7 billion, leaving a gap between revenue and expenditures of roughly $5.8 billion, otherwise known as the deficit. Republican Emmer has outlined a budget plan that cuts real and projected spending growth but hasn’t detailed how he would account for a growing demand for state services.
There are two key pots of money being moved around that make these budget contortions even trickier. In this biennium, the state got about $2 billion in federal stimulus funding that helped pay for education and health care. The one-time cash transfer effectively allowed the state to spend more without drawing down general funds in the current fiscal year.
This funding disappears in the next biennium, but is nevertheless included in projected spending for the state. And it’s unlikely that lawmakers are going to find an additional $2 billion to fill the hole.
Add to that the $1.4 billion the state is obliged by law to repay schools in the next biennium, and the deficit begins to take shape. (Emmer and Horner have both said they will push back payment to the 2014-2015 biennium.) The rest of the deficit reflects recent cuts made to balance the budget and cost increases associated with a growing, aging population.
Though revenue is going up in the next biennium, Horner says that the state won’t really have an extra $2 billion extra to play with. And he’s correct: that federal funding disappears in the next budget cycle.
This claim is accurate.
Duluth debate, Sept. 7, 2010
Minnesota Management and Budget, Price of Government, May 2010
Minnesota Management and Budget, General Fund Balance Analysis: End of 2010
Legislative Sessions, accessed Sept. 28, 2010
The Minneapolis Star Tribune, That deficit is a demon, and Emmer doesn’t want to face it, by Lori Sturdevant, Aug. 28, 2010
Minnesota 2020, Emmer’s Faux Claims on Revenue, Spending Growth, by Jeff Van Wychen, Sept. 15, 2010
Minnesota Public Radio News, Tax increases in Dayton, Horner budget plans; Emmer downplaying deficit, by Tom Scheck, Sept. 1, 2010
Interview, Tom Horner, Sept. 28, 2010
Interview, Bill Marx, Minnesota House of Representatives Chief Financial Analyst, Sept. 29, 2010
Interview, Jay Kiedrowski, Senior Fellow, the Humphrey Institute of Public Affairs, Sept. 28, 2010
Interview, Curt Yoakum, spokesman, Minnesota Management and Budget, Sept. 28, 2010