Here’s a little known fact of the new Dayton budget proposal: Spending is going up 20% in 4 years.
Minnesota government General Fund spending was projected by MMB late last year to be $33.9 billion for the FY 12-13 biennium. Revenues came in $1.33 billion higher, and that money has paid off the FY 12-13 school shift and some of the earlier school shift. So let’s mark down total spending to be $35.2 billion.
In its documents, the Dayton administration proposes spending for FY 14-15 to be $37.9 billion, an increase of $2.7 billion or 7.6% from FY 12-13. Expenditures had been forecasted by MMB before that to rise to $36.9 billion anyway. So rather than make any dent in the projected $1.1 billion deficit under that forecast, the Dayton administration added an extra billion of spending. (“Spending” is the word the rest of the world uses for what the administration calls “investments.”)
In this document we also get projections of spending for FY 16-17. Biennium expenditures would rise to $40.7 billion ($2.3 billion more than MMB had projected in November.) Revenues rise to $42.1 billion, $3.4 billion above the November forecast. The surplus is used to finish paying off the school shift – none of it is planned to be paid back before the end of this Dayton administration. That $42.1 billion will not go down in future biennia. Therefore, spending goes from $35 billion to $42 billion in four years, an increase of 20%.
I know of no forecast of inflation over the next four years that would warrant a 20% nominal increase in the government’s budget. The Federal Reserve is now engaged in quantitative easing because it thinks inflation is too low, and says it will keep doing so until inflation reaches 2.5% per year. That might justify a 10% increase, but not 20%. And how many managers of private businesses would long keep their jobs if they justified every increase in expenditures as “that’s just inflation?”
There’s a great deal of discussion about the Dayton tax proposal, but pay close attention to the spending in this budget, and its implications for the size of future state budgets.
Cross-posted at CAE