The updated state budget forecast was released today, and it contains some good news. The projected budget deficit for 2014-15 has fallen by $463 million to $627 million.
Of the $463 million improvement, $323 million reflects increased revenues. Most of the revenue increase comes in individual and corporate income taxes and is primarily a result of changes in Minnesota law passed earlier this month conforming state tax law with federal tax law. On the spending side, the early opt-in to the Medicaid expansion as part of the Affordable Care Act continues to pay dividends for the state, as projected spending on these programs is projected to drop $64 million from the previous forecast.
The $627 million deficit figure does not include inflation on the spending side of the equation. Projected inflation for the 2014-15 biennium totals $854 million. Governor Mark Dayton’s original budget proposal did not include inflation into his baseline spending, so that amount was — in real terms — a spending cut.
Also of note in the updated forecast was the continuing dismal performance of electronic pulltabs, which are being used a funding source to back the bonds on the new Minnesota Vikings stadium. When passed last May, estimates of revenue in the 2012-13 biennium totaled about $35 million, but to date, the state has collected less than $2 million. As a result, revenue estimates have been slashed in half for the coming biennium, leading to the question of whether or not it’s time to start looking for a Plan B.
To further illustrate how poorly the e-pulltabs have fared, when the bill was passed, it was anticipated that by the end of 2015, pulltab revenues would have exceeded stadium expenses by $65 million, Now, pulltab revenues aren’t expected to catch up to expenses until 2021.
Gov. Dayton is speaking this afternoon outlining his reaction to the updated forecast, although he is not expected to release his new budget until the week of March 11. Dayton has signaled an increased renters tax credit and exemptions for capital equipment. Additionally, I will be posting an updated Brick City Budget proposal that reflects the new figures tomorrow (or later today).