CHICAGO — With its economy on the mend, Minnesota now expects to collect an additional $323 million in its current two-year budget cycle based on its annual February revenue forecast.
Under state law, the first $5 million goes to replenish its reserves that were diminished to help balance past budgets hit hard by the recession. The new deposit will bring the account’s total to $653 million. “This forecast confirms the last forecast — our state’s economy is growing and our budget situation is improving. The trouble is that we still have lots of IOUs, so it’s not a time to let down our guard,” management and budget commissioner Jim Schowalter said in a statement.
The remaining $318 million goes to speed up the K-12 education aid payments the state pushed off to help balance its books for fiscal 2012-13. Minnesota last year pushed off payment of $2.7 billion in aid to public education, squeezing districts’ budgets and forcing many to turn to short-term cash flow borrowing.
The annual forecast that follows one in November projects the state will collect $33.8 billion of general fund revenues over the biennium that began last July 1, about $93 million more than forecast in November while spending is now expected to decline by $230 million.
While economic indicators suggest the state’s economy has stabilized and is on the mend, the forecast still projects a deficit in the 2014-15 biennium of $1.1 billion. That figure is down slightly from the $1.3 billion of red ink anticipated in the November forecast. Uncertain federal actions and state policy choices on health care reform make analysis of revenues available for the 2014-15 cycle more difficult to predict, the report said.
The November forecast anticipated $876 million in additional revenue during the current biennium. The entire amount went to replenish the reserve account and for a cash-flow reserve which now stands at $350 million.
Lawmakers relied on the school aid delays last year to close half of a $5 billion deficit in the $35 billion budget. Gov. Mark Dayton, a member of the Democrat-Labor-Farmer party, sought a mix of cuts and an income tax hike on top earners to fully erase the deficit, while Republicans, who control the Legislature, refused to go along with any tax increase.
Minnesota’s heavy reliance on one-shots to balance recent budgets drove negative rating actions last year. Standard & Poor’s lowered its rating one notch to AA-plus, while Moody’s Investors Service revised its outlook on Minnesota’s Aa1 rating to negative from stable. Fitch Ratings downgraded the state’s $6 billion of general obligation debt to AA-plus from AAA.