The state government’s surplus is projected to be smaller, but that does not justify tax hikes

In December, Minnesota Management and Budget (MMB) forecast a surplus for the state government budget of $1.5 billion for the next biennium. Today, they have released their February Budget and Economic Forecast.

The headline is that the surplus is now projected to be smaller; $1.0 billion over the coming biennium. This is due to “Slower projected economic growth and lower observed collections compared to prior estimates result[ing] in a reduced revenue forecast throughout the budget horizon”. Fortunately, “A slightly lower expenditure forecast partially offsets the overall reduction to the projected balance”.

This doesn’t mean we need to raise taxes

A surplus of $1.0 billion poses many of the same questions as a surplus of $1.5 billion does. What should lawmakers do with it? Spend it? Leave it with the state’s citizens? Hold fire until the fiscal situation becomes clearer?

What it does not mean is that we need to raise taxes. As I wrote last week, Minnesota’s politicians are flush with cash by historical standards. In real terms, they have never had as much money to spend as they have had in recent years. And, on top of this, they are forecast to have an extra $1.0 billion swilling around.

And yet, even with all this cash, they have failed in one of their core jobs; maintaining the state’s transportation infrastructure. The American Society of Civil Engineers recently said that

“Minnesota’s 140,000 miles of roads are in poor condition, earning a grade of a “D+.” The average driver in the Twin Cities spends 41 peak hours in congestion each year, averaging a cost of $1,332 in congestion costs and wasted time.”

Before dipping into the pockets of the state’s citizens once again, perhaps Minnesota’s lawmakers ought to explain where the vast sums they have had already have gone?

Minnesotans are some of the most heavily taxed people in America. Rather than trying to increase the burden on them, state policymakers should first be looking at how they spend the money they already get. If, with historically high revenues, they have failed to perform key tasks such as road maintenance, it isn’t clear that a lack of money is the problem.

John Phelan is an economist at the Center of the American Experiment.