Current budget forecast schedule wastes valuable time
The Minnesota legislature begins its next session on Tuesday, January 14, 2025. Legislative junkies are scratching their heads saying, “Since when can they start so late in a budget year?” Since they changed the law, it turns out. A few years ago, the leaders of the House and Senate decided it was too difficult to begin the session immediately in January after an election, especially when the majority switches from one party to the other. So beginning in 2025, the biennium will begin “on the first Tuesday after the second Monday in January of each odd-numbered year.”
Now that we know the legislature can make significant changes to the way it does business, here’s another suggestion: move up the calendar for budget forecasts so the legislature and governor can get to work on the state budget as soon as the session begins.
Thirty years ago, the legislature passed a law outlining the procedure for reporting budget forecasts that includes a preliminary forecast in early December and a final forecast in late February. During the months of December, January and February, the legislature mostly sits around waiting for the February forecast. Then there is a mad rush to put together and pass a two-year budget between March and the adjournment date in May.
Meanwhile the governor is mandated by state law to present a budget to the legislature “by the fourth Tuesday in January in each odd-numbered year.” The governor puts this budget together using the preliminary December forecast knowing full well it will be obsolete a month later when the final forecast arrives in late February.
Once the February forecast is digested, the governor submits a supplemental budget which the legislature (mostly) uses to put together their budget bills. The current process forces the governor to put out an incomplete budget while the legislature sits around for three months waiting for the correct numbers. And these “correct numbers” are only a projection of what will happen to revenues and expenditures in the future based on economic indicators and current statutory spending levels. In other words, it’s our best guess.
Match the forecast to the fiscal year
What if the legislature changed the budget forecast schedule to more closely align with our fiscal year, which begins on July 1? The governor’s budget team at Minnesota Management and Budget (MMB) could provide a wrap-up of the previous budget in August or September of the even year and include a preliminary budget forecast for the next biennium at that time. A “final” budget forecast can be issued in December in time for the next legislative session.
Moving up the forecast schedule might add less certainty into the budget data, but who are we kidding? The forecasts have been wildly off from year to year, sometimes changing hundreds of millions of dollars between December and February. The trade-off between less accurate data would be offset by a smother budget setting process that does not involve a preliminary budget from the governor and the legislature wasting time with agency overview hearings until the February forecast.
The legislature made a bold move this year starting the session two weeks later. Surely they can fight the forces of “we always do it this way” to change the budget forecast schedule as well.