Government

Minnesota debates the complexities of a budget surplus

Andree Aberdeen

Andre Aberdeen

According to the findings of the Minnesota Management and Budget office, the state is experiencing one of the largest budget surpluses in its history.

 

The budget office announced the state is enjoying a $1.87 billion surplus for the 2016-2017 fiscal year. Even though state law requires $665 million of that surplus be placed in a general reserve fund, that leaves $1.21 billion for state lawmakers to allocate.

 

As the Minneapolis Star Tribune reported, one reason for the surplus was tax collection in the last two months of 2015, which exceeded early forecasting. The budget office reported revenue from November and December included individual income tax and corporate tax, as well as other revenue sources. All told, the state’s revenue for the two months totaled $3.7 billion – or 1.2 percent more than had been projected.

 

While being in the black is certainly better news for the state than being in the red, the surplus has sparked a debate among citizens and lawmakers as to how it should be spent.

 

Some state representatives are calling for tax refunds that would return at least a partial amount of the surplus to Minnesota taxpayers. Speaking with The Pilot-Independent, Rep. Tom Saxhaug said citizens should be able to benefit from the economic recovery the state is experiencing, especially as many low-income families struggle to make ends meet.

 

“Minnesotans expect and deserve strong stewardship of our tax dollars, and it’s clear we are moving forward,” Saxhaug said. “Looking to the 2016 Session, we must continue to be responsible with our budgeting, and we should look at using some of this surplus to help the crisis many of our state’s hardworking miners are facing.”

 

As CBS News reported, Gov. Mark Dayton has already proposed creating and expanding tax credits that would return money to low-income families. Republican lawmakers have also proposed property tax exemptions for some businesses and cabins, in addition to phasing out taxes on Social Security and military pensions.

Despite budgetary shortfalls in the early 2000s, Minnesota is now experiencing one of the largest budget surpluses in its history.

Determining priorities

As some lawmakers are advocating tax refunds, others, including some Minnesota residents, are hoping to see increased spending and investment in the state’s needs. In an editorial for MinnPost news outlet, two University of Minnesota professors argued citizens would be better served through investment in education than through tax refunds.

“For students, parents and educators, one reason for our surplus is obvious: Our state government backed away from its commitment to fund the future and worsened education inequality over a decade of disinvestment,” the professors wrote in the editorial.

 

“As some lawmakers are advocating tax refunds, others are hoping to see increased spending and investment.”

Others, including St. Peter Herald columnist Clark Johnson, have argued the surplus should be used to increase a rainy day fund that could contribute to education, health care and middle-class tax relief. Pointing to deficits experienced in recent years, Johnson argued the state would do well to remember how it once needed to borrow money from schools and local government aid in order to balance the general fund.

“Saving money for the budget reserves may not be the most popular idea during an election year,” Johnson wrote. “It is tempting to think short term and call for refunds or sweeping tax cuts but that is how the surpluses of the late 1990s turned into the deficits of the early 2000s.”

 

Speaking with The Pilot-Independent, Rep. John Persell noted expanding economic opportunity for Minnesota families may call for increased investment that lowers housing cost and provides tuition assistance for college students.

 

“The forecast says we’re growing, but it also highlights some of the specific challenges we’re facing up here,” Persell told the news outlet. “We’ve got companies that want to expand but they can’t because they need workers with the right skills, or their employees can’t find housing, or they have to move to the metro for higher incomes to pay the large student debts their taking on.”

 

How Questica can help

Unexpected budget surpluses drive considerable debate on how excess funds should be allocated. Lawmakers are often forced to decide between cutting taxes, restoring spending in social aid programs or building up rainy day funds that could prevent layoffs or service cuts in the event of a future recession.

 

With its comprehensive and flexible web-based government budgeting software, Questica offers a streamlined alternative to inefficient spreadsheets, allowing governments to properly evaluate the future impact of any spending or investment decisions. Questica has specific tools designed to pool data from multiple sources, identifying funding streams and revenue gaps. With unlimited forecasting, Questica allows states to accurately envision hypothetical budgeting solutions over multiple years and easily compare different versions of a proposed budget.

 

Through its Operating Platform, Questica can offer governments the ability to track workforce costs and see how these costs will play out years down the road. Questica’s Capital Budget platform allows entities of any size to track spending for all forms of capital investment over multiple years. The Performance module enables governments to see how their spending is put into action by tracking performance targets, such as increased college enrollment or health care programs.

 

Public sector entities considering multiple spending scenarios should contact Questica today to learn how flexible software can contribute to informed spending decision and the attainment of organizational goals and objectives.