Legislative Update 2016-12-02

The following information was shared via email with the library community by Sam Walseth, Capitol Hill Associates, in his role as the MLA-ITEM lobbyist.

State Budget Forecast Released

State officials released the November budget forecast for the state of Minnesota on Friday, December 2nd. The forecast estimates that the state will close its current fiscal biennium next June 30th with $678 million left on the bottom line. That figure takes into account $334 million that will be automatically transferred to the state’s budget reserve as required by law. This action will bring the state’s budget reserve to $1.9 billion, just shy of its $2 billion statutory goal.

The forecast shows a $736 million surplus for the next fiscal biennium (FY 18-19). When added to the $678 million current fiscal year projected surplus you get the “$1.4 billion surplus” figure you’re seeing in the headlines. There are two important factors here. The first is that a significant portion of the $1.4 billion surplus figure is one-time money carried forward from the current fiscal year. The second is that there’s no inflationary assumption built into the forecast. If the state applied an estimated CPI factor into the forecast, the FY 18-19 surplus shrinks to $87 million.

The ‘tails’ forecast for FY 20-21 is also important to note. Friday’s data show a $1.5 billion surplus for the tails, but again with no inflationary factor. If an inflationary factor is assumed for the tails that surplus figure disappears and could actually look like a deficit. The bottom line is that while the headline numbers look good, there’s still a lot of uncertainty about the economy moving forward. The current forecast assumes GDP growth just above 2% for the foreseeable future instead of figures north of 3% that were hoped for a year ago.

Legislative Response

The major players in St. Paul are all indicating that a special session is a definite possibility. They’re targeting December 20th as the date to come in and tackle some of the major unresolved issues from this year, including; the Tax bill, the Bonding bill and a new proposal to buy down insurance premiums for those buying health coverage through MNSure’s individual market. The Bonding bill is the most significant interest to libraries as it contains $2 million for library construction grants.

For more information on the budget forecast

Samuel P. Walseth, Capitol Hill Associates

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