After a grizzly political battle over a $5 billion budget deficit that shut down the state government for nearly three weeks of July, Minnesotans were more than surprised to wake up $876 million in the black yesterday.
Many in the state were expecting yesterday’s budget forecast to be more bad news that could potentially prompt a second Alamo-like stand-off in the legislature. State economists insist that the July shutdown wasn’t the reason for the surplus. They credit the success to the cocktail of higher tax revenues, lower health care costs and spending cuts. Any savings that came from the shutdown were negligible, state economist Tom Stinson told me.
In a climate of ever-worsening financial news, a government of any size running a surplus seems surprising, but Minnesota’s good fortune isn’t an anomaly. The Associated Press recently reported surpluses for Alaska, North Dakota, West Virginia, Wyoming, Massachusetts, South Carolina and Virginia. Stinson reminded me that it’s hard to take a roll call of which states are in the red and which are in the black at any given moment, as forecasting happens at different times in different states.
That won’t stop the Democratic governor, Mark Dayton, and the Republican-led legislature from making political hay from the surplus. Each side will spin the success as a testament to the strength of their actions and ideals. But they would be advised to make that hay while the sun is still shining, an analogy that doesn’t quite work this time of year in freezing Minnesota wintertime weather.
Economists fear that any of a broad variety of scenarios, from failure of Congress to extend the payroll tax cut to further instability in Europe, could see them back in deficit by the time of the next budget forecast in February.
You’d think Minnesota’s good fortune would cause today’s economic Pulse to beat stronger, but some simple math drives it right back down again. Fifty states minus eight with surpluses equals 42 still struggling to keep their heads above water.
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