The Free Press, Mankato, MN

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June 9, 2013

Increase budget reserve

Why it matters: Experts say Minnesota's budget reserve isn't adequate to cover the state's volatile revenue stream

Minnesota’s growing economy pumped an extra $300 million into state coffers recently and some political leaders seem to be licking their chops.

We say not so fast.

The $300 million sounds like a lot but represents just 0.7 percent of a two-year state budget of about $38 billion.

We doubt most Minnesotans would go on a spending spree if they got a 0.7 percent raise.

The $300 million sounds good until we realize the state still owes schools about $850 million and our budget reserve is about $1 billion below where experts say it should be.

Still, the news seemed to excite some political leaders. If revenues continue to grow, they say, there may be new spending on education, roads and tax relief.

DFL House Speaker Paul Thissen told the Star Tribune such new spending is “very possible” if the economy continues to improve.

We suspect Republican leaders would just as soon also “spend” the extra in the form of lower taxes or tax breaks as has been their mode of operation. They favored reducing reserves last year.

Windfalls look great. Everyone’s happy. No one argues. The green is spread around.

That was the trap the snared Democrats, Republicans and an Independent Party governor in 2001. The state was rife with cash. School funding was expanded by some $900 million. Tax rates were lowered and sales tax rebates were doled out like free candy at a carnival.

Then the economy reminded us we weren’t that smart.

It’s a legacy that left a decade of deficits, not one but two state shutdowns, crumbling roads and a quality of life that went backwards.

And yet we don’t seem to have learned much from history.

While current law requires any surplus we have June 30 go toward the school payback, the fiscal prudence of our leaders seems to have gone missing. A new rainy day strategy is needed.

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