STATE BUDGET DISCUSSION CONTINUES
12/22/09
Minnesota’s budget deficit is not the state’s only
financial problem. Not unlike many American
families, the state is also suffering from cash flow
issues. The timing of state expenditures does
not necessarily line up with the timing of revenue
influxes, which causes dips in the state’s coffers
throughout the year. Think of it as your auto loan
payments coming due on the 12th of the month, but you
don’t get paid until the 15th. And just like
you might need someone to float you a loan for that
three day gap, the state is considering short-term
borrowing to cover their cash flow gaps.
Minnesota Management and Budget (MMB) Commissioner Tom Hanson told members of the Legislative Commission on Planning and Fiscal Policy (LCPFP) Subcommittee on a Balanced Budget that his department was considering two short-term borrowing options: a line of credit and selling certificates. MMB is accepting requests for proposals for both options. At this time Hanson is not sure we would ever have to use the mechanism, but he is hoping to put a process in place so it is ready to go, just in case. Whichever borrowing mechanism MMB opts for, it appears it will require an advisory recommendation from the Legislative Advisory Commission. Hanson told the LCPFP they expected to seek that approval in early January. March, April and May have historically seen some of the state’s leanest month, in terms of cash flow, so it’s not likely we’ll know whether the mechanism will need to be put into motion until that time.
In addition to the cash flow discussion, MMB also told the panel Governor Pawlenty intended to submit his deficit reduction recommendations in bill form, in the traditional supplemental budget manner. LCPFP members asked if it would be possible to get those recommendations before the end of the year so they could start hearings on them right after the New Year, but Hanson was not confident they could deliver quite that early. Senate Majority Leader Larry Pogemiller (DFL-Minneapolis) said the legislature was willing to start hearings on the Governor’s recommendations before the start of session in February if they received them in January.
The LCPFP has asked their fiscal staff to run models of various budget balancing scenarios, including balancing the entire deficit through cuts and making the Governor’s unallotments permanent. Staff presented their first run at the models this week. The exercise gives legislators a clearer picture of what the effects of the different budget balancing approaches would be.
Minnesota Management and Budget (MMB) Commissioner Tom Hanson told members of the Legislative Commission on Planning and Fiscal Policy (LCPFP) Subcommittee on a Balanced Budget that his department was considering two short-term borrowing options: a line of credit and selling certificates. MMB is accepting requests for proposals for both options. At this time Hanson is not sure we would ever have to use the mechanism, but he is hoping to put a process in place so it is ready to go, just in case. Whichever borrowing mechanism MMB opts for, it appears it will require an advisory recommendation from the Legislative Advisory Commission. Hanson told the LCPFP they expected to seek that approval in early January. March, April and May have historically seen some of the state’s leanest month, in terms of cash flow, so it’s not likely we’ll know whether the mechanism will need to be put into motion until that time.
In addition to the cash flow discussion, MMB also told the panel Governor Pawlenty intended to submit his deficit reduction recommendations in bill form, in the traditional supplemental budget manner. LCPFP members asked if it would be possible to get those recommendations before the end of the year so they could start hearings on them right after the New Year, but Hanson was not confident they could deliver quite that early. Senate Majority Leader Larry Pogemiller (DFL-Minneapolis) said the legislature was willing to start hearings on the Governor’s recommendations before the start of session in February if they received them in January.
The LCPFP has asked their fiscal staff to run models of various budget balancing scenarios, including balancing the entire deficit through cuts and making the Governor’s unallotments permanent. Staff presented their first run at the models this week. The exercise gives legislators a clearer picture of what the effects of the different budget balancing approaches would be.