Posted: 02/28/13 19:53
by Dave Mindeman
There is some good news in the economic forecast....we have less of a deficit....
The latest projection, released Thursday, shows the state?s shortfall has shrunk by nearly $500 million for the state?s 2014-2015 budget cycle. That brings the total that Gov. Mark Dayton and the DFL Legislature must fill to $627 million, down from the earlier estimate of $1.1 billion.
This will allow for more discussion on changes to Dayton's budget plan, but the legislature should still stay on track. It is still a deficit and the plan is to fix the idea of structural deficits.
Republican legislators are quick to take credit....
Republicans have credited the ?pro-growth? policies their legislative majorities enacted over the last budget cycle with jump-starting the state?s economy.
But I question the "pro-growth" aspect of it. The forecast improvement comes from better than expected collections on income, sales, and corporate taxes. Exactly what did the Republican legislature do that was responsible for better collections?
#1 - They did not change anything about tax rates. No changes in income, sales, or corporate taxes. They did try to reduce corporate rates, but I would assume that would have reduced the improvement.
#2 - Since economic activity increased, what exactly did the GOP legislature do that would have helped with that. Maybe they could say some of their minor regulatory changes helped on the margins....although Dayton could make the same claim with administrative directives.
#3 - Maybe, you could make a case for the "hidden" money that helped with balancing revenue in a gimmicky, off the books, way. Let's take the school shifts. We still owed $1.1 billion as the session began....and the tobacco bonding made up another $640 billion in revenue. Those gimmicks helped balanced the books, but left us with obligations. The end of the year surplus of $290 million goes directly to the school shift. That could have furthur decreased the deficit by that amount if not for the money we owed. What we are left with is an IOU of $801 million. And then there is the tobacco bonding which works this way:
$640 million of the $757 million bond sale will go to fix the state's budget deficit. The remaining $117 million will go into a special account to cover the cost of issuing the bonds and creating a reserve to pay back bondholders. The bonds are backed by future payments from the state's 1998 settlement with tobacco companies. The state will eventually pay bondholders $1.2 billion over the life of the 20 year bonds.
So, if our GOP legislators are going to take credit for the budget as it stands now, then they need to take credit for all of it....
Even with the economic growth that has improved the forecast,
a) we still have deficit of $627 million.
b) School shift took any surplus and we still owe $810 million
c) We have tobacco bonding debt of $1.2 billion taken from future payments.
So even with the much improved forecast, the last budget cycle left us with over $2.6 billion in obligations.
$2.6 billion debt
That is what we can thank the last GOP legislature for.....