Thursday, February 28, 2008

Don't Fear the Reaper (Well, Maybe Fear him Some). The budget news is in and it certainly isn't good. I suppose one can take a bit of heart from the fact that the revenue shortfall did not reach a billion dollars for the current biennium (at $935 million, close, but no cigar), but the worsening of the budget situation by $562 million is not the kind of news anyone was hoping for as the session wears on. This is certainly going to complicate matters, as it is going to be extremely difficult to fashion a solution that is palatable to all, not to mention the partisan cards that are going to be played in the development of any solution.

Minnesota Finance Commissioner Tom Hanson was the bearer of the bad budget news as he explained the state's fiscal woes. Revenue collections are down by $530 million, with $313 of that coming from from falling income tax receipts. A large part of that problem is generated by the falling value of investment portfolios and the resulting reduction in capital gains tax receipts. Corporate tax receipts fell by another $139 million since November and are now $456 million below the end-of-session estimate. State economist Tom Stinson (pictured at the right) provided detailed analysis during the formal presentation.

The one surprise to me was the way the word "recession" was tossed about with relative ease during the presentation. The budget performance estimates provided by Global Insight--the company that provides the state with its economic performance statistics--is predicting a short recession, lasting for the first two quarters of 2008. This recession not only affects the current biennium, but also causes problems in the 2010-2011 biennium. That projected shortfall now sits at $1.086 billion. By law, the Legislature has to balance not only the current biennial budget, but the budget for the "out years" as well. This may prove to be the more complicated task before the Legislature, as it will be impossible to use one-time money or reserve funds to solve the longer term budget problem.

Minnesota Department of Finance Link with February Forecast Documents:

Molnau Ousted. It looks like another nail in bipartisanship's coffin as the Senate, on a straight party-line vote, voted not to approve Lieutenant Governor Carol Molnau as Commissioner for the Minnesota Department of Transportation. It is too early in the day to gauge reaction to the Senate's action, but my guess it will pretty much follow partisan lines. It will be interesting to see who the Governor taps to fill the role as the Department of Transportation Commissioner.

The Bad Penny Opera. German-American composer Kurt Weill wrote "The Threepenny Opera" in 1928 and Education Minnesota looks to be writing "The Bad Penny Opera" in 2008 as it brings the mandatory school employee health insurance pool bill back before the Legislature this session. There are several changes in the bill--principally that the pool will generate its own reserves for the first two years through premiums before it becomes self-insured--that make the bill appear different, at least on its face.

The bill creating the pool--SF 2747 (Betzold) was slated to be heard today in the Senate Commerce and Consumer Protection Committee, but time constraints prevented that from happening. The bill will be heard next Tuesday evening.

I want to make it clear that I don't have a problem with Education Minnesota bringing this back again. There is clearly a segment of their membership that strongly believes that something resembling this approach is necessary to help combat skyrocketing premium costs. The question remains as to whether this is approach will achieve that goal.


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