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July 15, 2012

Our View: State still needs a sustainable budget

The Free Press

When tax collections were added up this week for the just closed 2012 fiscal year, Minnesotans got uplifting news that’s been rare in recent years.

Minnesota Management and Budget Commissioner Jim Schowalter said the state took in $336 million more in revenue than was forecast just five months ago.

The surplus will, by law, be used first to refill the cash flow account, restore the state budget reserve and begin repaying delayed state payments to school districts. Those are the most important priorities and any other proposals for increased spending would be irresponsible.

That’s because while the surplus gives state leaders some breathing room, there is still an  upcoming 2014-15 biennium budget shortfall of around $1 billion.

While the state’s financial future is still fragile, this week’s report offers a lot to be cheerful about. Tax collections were up across the board, with the manufacturing sector proving to be robust and the health-care sector growing.

Improvement in the better-paying manufacturing sector is particularly heartening. Nationally, manufacturing output still lags that of 2007, but Minnesota’s manufacturers are producing 13 percent more than they were at the start of the recession.

Minnesota’s gross domestic product has also grown much stronger than nationally.

If the economic growth and good news continues, it will ease the task of lawmakers and the governor. But the looming shortfall in the 2014-15 biennium is a reminder that elected officials will need to develop a sustainable budget. The current system is subject to wild ups and downs in revenue collections.

Elected officials have dealt with recent budget problems with too many fiscal gimmicks and short-term fixes, such as selling future tobacco settlements. They need to look more closely at the systematic changes needed in the tax system.

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