The Free Press, Mankato, MN

December 6, 2013

Take care on budget surplus

Why it matters: Budget surpluses can turn into deficits in a blink of the economy

The Mankato Free Press

---- — Minnesota taxpayers can take some relief in a state budget forecast that shows a surplus of $1 billion by June 30 of 2015, after years of sustaining multiple billion dollar deficits.

By law, the money the state borrowed from schools over the last couple of years will be paid back. That reduces the surplus to about $825 million.

As usual, there is already talk of spending the surplus and or providing tax relief. Democrats and Republicans have suggested upping the pay to working employees of nursing homes through state reimbursement formulas. Both Gov. Mark Dayton and Republicans have suggested use of surplus money for a rollback of certain taxes passed last year, including the one on farm equipment repairs.

All proposals deserve robust discussion, but state lawmakers would do well to also replenish state reserves to historical levels and beyond. As the U.S. economy continues to slowly move up with periodic setbacks, a larger reserve seems prudent to mitigate the volatility of state revenue streams.

Excessive spending or tax cutting that only lurches the state budget back into deficit won’t serve anyone.

State lawmakers and the governor should take a value-added approach to spending or tax cutting, making sure taxpayers get a reasonable return on investment for either approach. Spending should have some economic impact on the economy or include investments that save taxpayers’ money down the road. Tax cutting should also provide a measurable benefit and go beyond a nice idea for a favored constituency.

Minnesota’s economy is back on track. Let’s not get carried away.