The Free Press, Mankato, MN


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


There are few political risks in this approach. Political leaders only need to consider the advice of their own just a few short years ago. In 2009, the Minnesota Budget Trends Study Commission recommended a reserve of $2 billion. The current requirement is $653 million and we have met that.

That group was made up of 15 people, Republicans, Democrats and one independent.

The commission determined through research that the state’s revenue stream was volatile and becoming more so all the time. Old budget reserve levels put the state at risk of a yo-yo fiscal policy that we’ve witnessed over the last few years, a policy that has wreaked havoc on all kinds of important, and basic, public needs like good roads.

Private and public sectors studies, including the budget commission and another by the Minnesota Business Partnership, have pointed out that the growth in Minnesota spending will continue to outpace the growth in our revenues and that deficits will likely re-occur if we don’t “structurally” balance our budget.

Even Gov. Mark Dayton urged a strong reserve when he vetoed the Republican tax proposals in 2012. He vetoed the Republican plan to draw down reserves to pay back money the Legislature had borrowed from schools, a plan Dayton said would have cut the reserve by two-thirds.

Dayton went on to say Minnesota Management and Budget was recommending a reserve of $1.3 billion, with current reserves at half of the amount needed to protect against risks in revenue volatility.

Since Dayton was a champion of reserves last year, we would expect his enthusiasm would not have waned, but rather, increased, given a brighter economic outlook.

As Dayton said in his message last year, “As elected officials, we are responsible for the wise financial management of our state. Our first priority should be assuring state government’s financial stability.”

We couldn’t agree more.

Budget reserves are designed to staunch the fiscal bleeding that comes with deficits and prevent the lights-out political battles that lead to government shutdowns.

Minnesota’s first priority with any “windfall” revenue should be to pay back the schools but also to increase budget reserves.

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