We Need More Fiscal Honesty in the Minnesota State Budget Forecast

If I told Carly that we should stay in our house for another 5 years because it will be worth more when we go to sell it, she’d probably counter with something like, “But won’t houses we’re trying to buy also be more expensive in 5 years?” Touché.

Sadly, this logic doesn’t seem to apply to the Pawlenty administration who’s budget forecasts take the benefits of increased revenues into consideration while ignoring increased future expenses caused by inflation.

State Budget Forecast: Little Has Changed, in More Ways Than One

Leaving inflation out of the forecast helped create expectations of a budget surplus for the next biennium that does not exist. Putting it back in will help the media give an honest picture of the state’s finances and help the public understand what’s realistic – whether they want to spend more or cut taxes.

Charlie Quimby has more on this topic here:

Indeed, how to handle inflation is shaping up to be a legislative struggle — even with a DFL majority in both houses. Right now the state factors inflation when projecting how much revenue will come in. But departments can’t estimate the impact of inflation when planning how much they’ll need to spend in future years.

This budget process, mandated by law in 2002, has two possible effects, both creating downward pressure on spending. 1.Inflated revenues appear to exceed deflated spending estimates. This spurious surplus supports the notion that we’re taxed too much. 2. Departments and programs are funded at less than actual costs, forcing cuts that aren’t directly traceable to the politicians who caused them.

Come on, Pawlenty. Try running the state like you’d run your own household’s budget.

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