Poligraph: Daudt’s numbers correct, but there’s more to the story

Now that Democrats control the governor’s office and both chambers of the state Legislature, it’s likely that changes to the state’s tax code will be on the agenda this coming legislative session.

During an interview on TPT’s Almanac, incoming House Minority Leader Rep. Kurt Daudt, R-Crown, said he’s surprised there’s even talk of a tax increase given the Legislature will have more money to spend next year.

“The DFL should be giving thanks for the budget that we’re going to turn over to them,” he said. “The state is in a much better situation today than it was two years ago. And they’re going to have an additional $2 billion to spend without raising any taxes. But here we are, already talking about tax increases.”

Daudt’s raw number is correct, though he doesn’t factor the state’s spending obligations into his claim.

The Evidence

Daudt is talking about the roughly $2 billion more in revenue Minnesota lawmakers will have in the coming biennium.

According to Minnesota Management and Budget’s February forecast, the state has about $33.8 billion in revenue for the current fiscal year and is expected to have $35.8 million in the coming fiscal year – a difference of $2 billion.

But with budget claims such as this one, there’s always another way to view the numbers.

The detail Daudt leaves out is that spending is also expected to increase by between now and the next fiscal year. In fact, spending is expected to outpace revenues in the 2014-2015 budget year, which means a projected $1.1 billion deficit (though that number will likely change when Minnesota Management and Budget releases its latest forecast next week.)

Daudt argues that Democrats will have a choice in how they spend additional revenue – and whether they choose to meet all the forecast spending obligations.

“The facts are simple. You’ve got $2 billion of additional revenue and you get to decide how to spend it,” he said. “Let’s talk about can we make the budget work within that $2 billion before we start talking about tax increases.”

Tom Hanson who managed MMB during former Republican Gov. Tim Pawlenty’s tenure said Daudt’s right that the state has more money to spend.

But there’s a caveat that gets at the fundamental difference of how Republicans and Democrats view the state’s budget, he added.

“It’s a philosophy: what are we going to buy for this?” Hanson said.

Hanson gave this example:

“It costs more to cover X number of people on Medical Assistance. If we want to give them the same level of coverage [in the coming biennium], and an MRI costs $1,000 last year and costs $1,500 this year, what do you do? Limit the number of people who get MRIs or do you increase the amount of funding to cover it?”

The Verdict

Daudt is correct that the state will have roughly $2 billion more to spend in the next two-year budget cycle than it did in the last. But the state is also projected to spend more and that means lawmakers face a state budget deficit in the neighborhood of $1.1 billion.

The situation will create some tough choices for how lawmakers decided to spend the extra cash and how they close the deficit.

With those reservations, PoliGraph says this claim leans toward accurate.

SOURCES

TPT’s Almanac, Nov. 16, 2012

Minnesota Management and Budget, February 2012 Forecast

Email exchange, John Pollard, spokesman, Minnesota Management and Budget, Nov. 29, 2012

Interview, Rep. Kurt Daudt, Nov. 30, 2012

Interview, Tom Hanson, Winthrop and Weinstein, Nov. 30, 2012

  • John O.

    You are overlooking that the updated forecast of revenues/expenditures is next week. Not to mention there is the little matter of paying back all of the money that was “borrowed” from K-12. I do not believe this obligation has been fully satisfied yet. If it has, I’ll take my brickbats….

  • John O.

    Either way, the discussion is based (more or less) on an old forecast that is certain to change. Obviously, if our “leaders” in DC decide to go over the cliff, all bets are off in my book on what happens here with our economy.

  • Chad Q

    So the State is going to have $2 billion in money to spend but it wants to spend an additional $1 – $2 billion?!!! We have a spending problem, not a revenue problem. Elections have consequences and this one is going to hurt everyone.