While South Dakota struggles to hold its head above budgetary water, while we wonder if our K-12 schools will get even the meager 1% boost Governor Daugaard promised to salvage from the cruel, trickster jaws of IM22, Governor Mark Dayton of Minnesota is able to propose a 9.6% increase in his state budget without blinking, thanks to a $1.6 billion surplus:
Both Minnesota Republican and Democratic leaders agree being in the black on a state budget is better than the alternative. Minnesota has had four years of budget surpluses, which followed five-and-a-half years of budget deficits.
“It’s good news,” said Senate Majority Leader Paul Gazelka (R-Nisswa). “It makes it easier to balance the budget.”
…Experts says much of positive budget news is due to overall good health of the economy. More jobs means more people are paying more in taxes [Heather Brown, “Good Question: How Did Minnesota Get a Budget Surplus?” WCCO, 2017.03.01].
…Minnesota’s economy has continued to grow slowly, adding jobs and economic output over the last several years. In 2015, its gross state product grew 1.9 percent — 0.6 percentage points slower than the U.S. as a whole.
In part because Minnesota has a tight labor market — only about one person to fill every available open job — the number of hours Minnesotans work and their wages have seen an increase.
When Minnesotans make more money, so does the state, as income tax is one of the biggest sources of state revenue. Income tax revenue projections for the 2018-19 biennium are $24 billion, up $274 million from November’s prediction.
Wednesday’s forecast for sales tax, another major source of state revenue, is also projected to increase, thanks to optimism surrounding consumer spending. Put together, income and sales tax make up more than 75 percent of the state’s revenues [Greta Kaul, “The February Budget Forecast Sets the Terms for the Debate at the Minnesota Legislature. Where Do the Numbers Come From?” MinnPost, 2017.03.01].
I keep thinking of my neighbor Larry Spitzer, who asks why we would ever want to be like Minnesota. I think some Legislative appropriators could give a good answer to that question this weekend at the crackerbarrels.