State economic outlook is uncertain
With the recent release of the updated forecast from the Office of Minnesota Management and Budget, we can now see definitively that state's budget outlook is stable, despite slower economic growth than what was anticipated last November.
For fiscal year 2016-17, revenues are now forecast to be $42.3 billion and current law spending (any spending as authorized in current law and appropriated by the Legislature) is forecast to be $41.5 billion. Total general fund reserves increased by $8 million and as a result, the projected budgetary balance in the current biennium is now $900 million.
Changing economic conditions is what drives these significant changes in the forecast between November and February. Overall, the U.S. economic outlook has weakened. While our country saw increased consumer spending and homebuilding activity in 2015, there were also negative influences driving the outlook lower than expected: an excess of business inventories, depressed oil-related investments and the stronger U.S. dollar slowing global trade. The forecast for real gross domestic product growth has lowered from 2.9 percent in November to a projected 2.4 percent, though the projection for 2017 remains at 2.8 percent.
On the positive side, Minnesota's spending forecasts are lower due to an increased allotment of federal Children's Health Insurance Program funding, which will result in lower state obligations for medical assistance. This alone accounts for approximately $100 million less spending in fiscal years 2016-17.
What about the next biennium? Projections into FY 2018-19 indicate a surplus of $1.18 billion, which is down significantly from last November. Forecasting is always subject to economic adjustments, as well as any budgetary adjustments done by the Legislature.
Essentially, the forecast indicates that Minnesota's economy and budget remain stable. But the outlook is uncertain. As we enter into the 2016 legislative session, our focus should be on providing opportunity for ordinary Minnesotans who are squeezed by an economy that is not working for everyone. We owe it to Minnesota to be responsible in our policymaking and to listen to everyday people facing real challenges in the costs of health care, student debt, housing and many other areas. This is no time to be considering corporate special interest wish lists. Rather, it is a time to invest in working Minnesota families.
Erik Simonson, DFL-Duluth, is the Minnesota state representative for District 7B.