Ewald at the Capitol - March 5, 2010

February Budget Forecast Release

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Ewald Government
Relations Team

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Bill Amberg
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Eric Ewald
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Nick de Julio
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Key Legislative Contact Info
House Information Office
651-296-2146

Senate Information Office
651-296-0504

State Legislature Website
www.leg.mn

On Tuesday, the February Economic Forecast was released by the Minnesota Management and Budget office. The forecast shows an expected $994 million deficit for the remainder of the current 2010-11 biennium. This is a $209 million improvement from what was forecasted in November, which was a $1.203 billion deficit. Based on updated economic assumptions and current spending required by law, the FY 2012-13 budget shortfall is now projected to be $5.789 billion.

Minnesota Management and Budget Commissioner Tom Hanson noted that while revenues are slightly better than expected, the forecast doesn’t significantly change the budget challenges faced by the state. Legislators will now use this information as they try to balance the budget and work on other reforms through out session.

A copy of the complete February report can be found online at the Minnesota Management and Budget website.

New Revenue Stream?

They said it:

“Cutting government spending is more harmful to the economy than raising taxes.”- State economist Tom Stinson, as he discussed the February Economic Forecast in more detail before the Senate Tax Committee this week.

On Thursday, Senator Tom Bakk (D-Cook), introduced legislation to reduce Minnesota’s state sales tax, decrease the state’s massive budget deficit, and increase funding for Minnesota schools. To accomplish this, Sen. Bakk would implement Governor Pawlenty’s 21st Century Tax Reform Commission’s recommendation to expand the sales tax base; by eliminating the exemption on clothing beginning July 1, 2010. It is expected that if this were enacted $120 million a year would be paid back to schools as a result of shifts and unallotment. The plan would also reduce the budget deficit by more than $257 million in 2011 and permanently reduce Minnesota’s general sales tax rate from 6.5 percent to 6.25 percent.

As of right now, Senator Bakk is the only author of SF 2980 nor does it have a House companion at this time. It is unclear what kind of support this bill will receive in the legislature if any. However, Gov. Pawlenty has already told the media that he is not interested in the plan. Currently, Minnesota is one of the few states in the country that does not tax clothing.

Governor’s Bill Log

As a reminder, Gov. Pawlenty maintains a bill log on his website where public can see which bills have been signed by the governor or vetoed. You can also find veto messages from the Governor that further explain why the necessary action was taken by him. The bill log can be found on Governor Pawlenty’s website under Bill Log on the left hand side.

GAMC Plan

On Monday, the House was unable to override the veto of SF 2168 which is the General Assistance Medical Care (GAMC) program and MinnesotaCare provisions modifications bill. However, party leaders and the Governor have continued to work on negotiations all week. Democrats offered another proposal on Thursday night which incorporates concepts offered by Republicans that have been the subject of the week long negotiations.

Legislators will take the weekend to keep negotiations open on the bill as well as use the time to mull over the newest proposal.

Bonding Status

Much like the GAMC bill, legislators are back to the table as they try and work on a bill that is to the liking of Gov. Pawlenty. The latest bill which Democrats hope to move forward with next week is paired down from $1.1billion to $986 million. The new bill while still larger than what Gov. Pawlenty recommended now includes money for the Moose Lake sex offender facility. House and Senate Chairs of the Capital Investment Committee expect floor action to be taken next week on the bill.

The new bill however, does come out of the working group without interests of the Pawlenty Administration being weighed.

Rep. Kalin to Retire

Last week, we brought you a list of Legislature members that have formally announced they are going to retire a the end of this year’s term. This week another legislator add his name to that list as Representative Jeremy Kalin (D-North Branch), as he announced that he will not seek re-election this fall for a third term serving District 17-B. In his two terms as a member of the House, Rep. Kalin carried key legislation on areas from clean energy to overseas voting. Last year, Rep. Kalin was selected by the White House to chair CLEAN, the national Coalition of Legislators for Energy Action Now working with the Obama Administration and the U.S. Senate to pass comprehensive clean energy jobs and climate legislation.