November 20, 2008
A few weeks ago I attended the second-to-last meeting of the Minnesota Budget Trends Study Commission. To recap, this commission, established by the state legislature (not to be confused with the Governor’s 21st Century Tax Reform Commission), is made up of state budget experts and is tasked with recommending how we can minimize volatility in our state budget and tax system and prepare for the fiscal impact of demographic changes.
The commission discussed some of their draft findings (no draft report was handed out). We’ll get their final word in December. From what they discussed, here’s what you need to know:
- Inflation in the forecast matters. There was near unanimous agreement (with two or three notable exceptions) that the current practice of including inflation in the economic forecast for revenues and not expenditures creates a false picture of the budget.
- The need to limit growth in health care spending will be a major finding of the report. It’s not clear how the the commission will recommend we resolve this very sticky issue. I very much hope the commission recognizes that health care costs have been rising in both the public and private sectors. And in fact, private health care spending rose faster than public health care spending in 2005 (see this Minnesota Department of Health report). This is not a “big government” problem.
There are two meetings of this commission left. Next meeting is scheduled for Tuesday, November 25th at 9 am in the Centennial Office Building (could be changed since it’s close to Thanksgiving).
-Katherine Blauvelt
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Budget Process, Health Care, Taxes | Tagged: budget trends, commission, Health Care, inflation | 
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Posted by Katherine Blauvelt
April 16, 2008
Even though we are in the midst of negotiations to solve our state’s budget deficit, this is still a good time to be thinking about HOW that process works. Yesterday, Senator Cohen assembled an omnibus budget process reform bill (SF 3363) that we hope will eventually become law. Although we don’t have a position on every element in the bill, there are some very important provisions that we strongly support (you can also read my testimony from the Senate Finance Committee hearing):
- Let’s fix the forecast! In 2002, policymakers changed the law so that our state’s economic forecasts no longer include the impact of inflation on most areas of state spending. Putting inflation back in the forecast is a wise move that is long overdue. The forecast should give us all the information we need to make good budget decisions. For more background on this issue, visit our website.
- We love information! And the Senate budget reform package includes some requirements to improve the depth and breadth of information included in the Governor’s budget books. That’s great…more data means that both policymakers and the public will be better informed as we debate the issues.
- Build the reserves! Not a sexy issue…but in times of deficit we are certainly relieved to know there is a little money in the bank to help soften the blow. The Senate package would implement a plan to automatically rebuild the reserves up to 5% of the biennual budget (about $1.8 billion…compared to the current $653 million). We support the idea of automatically directing funds the reserve. We also support a goal of 5%, although we recognize it will probably be hard to get there, it’s what Minnesota’s Council of Economic Advisors consistently recommends.
The Senate bill is now awaiting action on the Senate floor. Similar measures are also moving through the House. But any budget reform efforts may have a tough time becoming law; last year the Governor cited the inflation in the forecast provision as the reason why he vetoed the tax bill.
-Christina Wessel
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Posted by Christina Wessel
February 21, 2008
This morning, I had the chance to speak at the Children’s Issues Briefing (sponsored by The Sheltering Arms Foundation and the Minnesota Council of Nonprofits). My comments focused on setting the context for this legislative session. In order to keep our state great, policymakers need to start solving our short-term deficits in a long-term way. Basically, I argue that: 1) it is in our short-term and long-term interests to at least maintain our current level of investments, 2) we should use our budget reserves only to buy time to implement long-term solutions, and 3) we should restore inflation in the forecast to provide us with a more accurate assesment of our state’s future fiscal health. If you want to know more, you can read the full text of my remarks.
-Christina Wessel
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Posted by Christina Wessel
