By Rep. Paul Anderson
Buoyed by an anticipated influx of federal dollars, the all-important February budget forecast released last Friday was indeed positive and a pleasant surprise. The key take-away had the state's $1 billion-plus deficit turning into a $1.6 billion surplus. Most observers had been anticipating a modest rebound from the November forecast, but the magnitude and swiftness of the change in just three months was amazing.
Surprisingly, tax collections coming into the state were above expectations, to the tune of nearly $1.5 billion. Evidently, folks made use of their Covid-relief money and spent it, causing an increase in sales tax revenue. And in anticipation of further money flowing in from Washington, the outlook for additional consumer spending is bright.
Less spending than originally forecast in K-12 public education also played a part in the new budget forecast. Approximately 16,000 fewer students in attendance, statewide, resulted in less per-pupil funding going out to school districts. One of the reasons for the reduction in students was frustration with COVID-19 restrictions placed on our schools. As a result, enrollment in private schools increased, as did the number of students being home-schooled.
Another factor in reduced state spending has to do with federal payments to Minnesota's Medical Assistance program. Because of the pandemic, the level of federal reimbursement was increased. It's expected that the current rate of funding will remain the same for the remainder of the year. That factor, alone, has saved the state over $1 billion.
The state's unemployment rate has also dropped from its pandemic high of 9.8 percent to 4.4 percent in December. That lower number, while encouraging, is partly due to a reduction in the labor force. Currently, there are now 35,000 fewer people working in Minnesota than before the pandemic struck. The leisure and hospitality industry has been particularly hard hit, with 44 percent of its workers out of a job.
With the state moving from a deficit to a surplus situation, the dynamics at the Legislature will change. Tax increases should be off the table, as revenue coming in will be more than ample to fund state programs. It may also give a boost to those calling for the state to conform with federal tax law pertaining to Payroll Protection Plan payments to state businesses. That money is not taxable on federal returns, but currently is subject to state income tax. Because the tax revenue from those payments has already been "booked" by the state, it would cost over $400 million to make the PPP money tax-free at the state level.
*****
Bids were recently opened for the railroad overpass project north of Glenwood on Highways 29 and 55. Original estimates for the project were around $13 million, but the actual bid came in considerably lower. It's expected that work will begin this July and run over a two-year period. Initially, work will be done on re-aligning Highway 55 and constructing one round-about. Work on the actual overpass and Highway 29 will take place next year.
Two projects in the Alexandria area are in the planning stage. One is a round-about at the intersection of Highway 27 and Interstate 94 west of Alex near the truck stop. That project is two years out. The other is the reconstruction of a rest area east of Alexandria near Lake Burgan. After the rest stop is enlarged in 2025, work is also expected on a new freeway interchange in that same area.
-30-