What the budget forecast means for Minnesotans
As you may have read, a new economic forecast came out on December 1. These forecasts are what legislators will use to guide budget decisions when the next session begins in January.
The latest report projected a surplus of $641 million for the current 2020-21 budget cycle, and a $1.27 billion deficit for the next fiscal year that begins in July. Thanks to a number of factors, including lower than expected spending, higher than expected revenues, and Minnesota’s diverse economy, the new findings were a sharp reversal from the $4.7 billion deficit projected in May.
And to be clear: the $1.27 billion deficit assumes that the legislature spends the entirety of the current surplus; if we don’t, the deficit will be smaller. If we spend none of the surplus, the deficit will be cut roughly in half.
It is good news that this economic report is better than the last, but we must be cautious. Next year’s budget deficit will require some difficult decisions.
The immediate priority is figuring out a way to get some relief to small businesses and employees that have been hammered by Gov. Walz’s executive orders, particularly the hospitality industry. Those businesses are in a dire situation, and they need help as soon as possible. Hospitality businesses are the ones who have been affected most by the closures, and they are by far the ones I get the most calls about. I’ll look at every option, but we have to do something to help them right away.
But given the size of the projected budget deficit, it would be wise to keep the relief bill smaller and more targeted than Democrats in the House of Representatives and Gov. Walz are aiming for. Spending too much now only makes our problems worse down the line.
One thing we can’t do is raise taxes. It does not make any sense to do a big relief package now to help these folks who are facing desperate circumstances, only to turn around and raise their taxes in a few months. We have asked these businesses and workers to make big sacrifices for most of the year. They have had to burn through their savings. Close their businesses. File for unemployment. We have to make sure they are protected from further financial hardship.
Whatever the deficit looks like in a few months, we have to balance the budget by tightening government’s belt.
A new report from the nonpartisan think tank Center of the American experiment, titled “Closing Minnesota’s Budget Deficit, is timely. Their research found that higher taxes have the opposite intended effect: of 26 economic papers reviewed by the nonpartisan Tax Foundation, 88% found higher taxes stunted economic growth.
And as we all know, Minnesotans pay high taxes. In fact, Minnesota’s lowest income tax rate is higher than 25 other states’ highest rates. We can fund the government we all want at a lower price than we’re paying.
Finally, the fastest way out of this is to get our economy churning again as safely as we can. We all take the coronavirus seriously, but we have to do whatever we can to open businesses and schools and keep workers on the job, using the strongest and best safety protocols. We have to address both the health crisis and the family financial crisis at the same time.
If you have any thoughts or questions about the budget or any other legislative issue, please contact me any time at Sen.John.Jasinski@senate.mn. It is an honor to serve as your state Senator!