Finally, some good news at the Capitol

Minnesota may have an extra $876 million on hand next year — the first good fiscal news for the state in almost five years.

Lawmakers, political experts and even the state’s economist expected a deficit as large as $1 billion going into the state’s budget forecast from the Minnesota Management and Budget  office at the Capitol Thursday.

“Surprise!” said MMB Commissioner Jim Schowalter prompting laughter around the room filled with legislators, lobbyists and media. A combination of unexpected revenue and spending cuts created the surplus.

An updated forecast will come out in February, but the mood at the Capitol was one of relief.

“We’ve now got a cushion for some of the future risks that the state has,” Schowalter said.

The news is good for the University, Chief Financial Officer Richard Pfutzenreuter said. He wasn’t surprised by the surplus, but was surprised by its size.

Pfutzenreuter said the forecast may persuade legislators to continue supporting the University financially, and that it “certainly helps the mood at the Capitol in regards to a bonding bill.”

The Board of Regents finalized its $170 million request for projects to the Legislature at the October meeting.

All of the extra cash will go straight to Minnesota’s savings. About $250 million will restore the state’s cash flow account. Another $621 million will beef up the state’s reserve account.

“This forecast is terrific news for Minnesota,” said Governor Mark Dayton in a statement. “I am particularly pleased at our success in controlling health care spending.”

Approximately 90 percent of spending reductions came in human services, according to the report. Most of that money was saved by Medical Assistance, the state’s low-income health care program for adults without children.

Overall, Minnesota’s economy is faring better than the national economy, state economist and University applied economics professor Tom Stinson said.

“Jobs and wages [in Minnesota] are growing faster than the U.S. average,” Stinson said. “That is expected to continue through 2012.”

The news came with reservations — the announcement doesn’t mean Minnesota is out of hot waters, Schowalter said.

Though the forecast predicts a positive budget until 2013, the 2014-15 biennium is expected to take a dive to a deficit of $1.3 billion.

“Overall, we still have issues. We still have risks. We still have concerns,” Schowalter said.

Politics as usual

In a series of press conferences after the budget announcement, the news quickly turned into a partisan issue.

“What this proves is that controlling spending is what got us here and we’re going to continue with that,” said Senate Majority Leader Amy Koch, R-Buffalo.

Koch said that Dayton’s proposed plan to increase taxes on high-income earners won’t pass because of the unexpected funds.

 “Republicans took the state to a shutdown and they really haven’t fixed the problem,” said House Minority Leader Paul Thissen, DFL-Minneapolis.

He said the state has issues with spending cuts which he said hurts small businesses, students and seniors.

“The budget has not been balanced for ten years,” said Rep. Phyllis Kahn, DFL-Minneapolis.

She said she hopes a $1 billion dollar bonding bill will be passed in the next session.

Senate Majority Leader Koch said that more spending is not the solution.

“This is only the beginning,” Koch said. “There’s so much more work to be done.”