Editorial: Return inflation to state budget forecasts

12/07/2005

Star Tribune
December 6, 2005


The state’s books are back in the black. The forecast has them staying that way through mid-2009. The next state budget won’t be set for 18 months.

That makes 2006 the time to outlaw the fiscal sleight-of-hand that the 2002 Legislature made lawful. Inflation in expenditures should again be included in state budget projections.

Inflation was never discarded from the revenue side of state budget forecasts. Indeed, if left to their own devices, some of the state’s politicians likely would have stretched inflation’s projected impact on revenues to the max. But inflation was banished from expenditure forecasts in an election-year attempt to make a badly listing state budget appear balanced. It was a bipartisan, bicameral maneuver—both DFL Senate leader Roger Moe and House GOP leader Tim Pawlenty were running for governor in 2002 and were eager to postpone a fiscal reckoning until after the election.

Last week’s state financial report should assure Gov. Pawlenty and legislators that they will be under no such duress next fall, when they again stand for election. Projections for the 2008-09 state budget show a bottom line big enough to stay in the black, even if inflation in those years matches economists’ current estimates—1.7 percent in 2008, 2.2 percent in 2009.

The setting of the next state budget is an extensive process that begins in the summer of 2006. If the 2006 Legislature, meeting next spring, makes expenditure inflation again part of state forecasts, work on the new budget can begin with numbers that reflect fiscal reality.

Legislative leaders and state finance officials vowed last week that, with deficit pressures behind them, they would restore this state’s somewhat tarnished reputation for sound fiscal management. That mission won’t be accomplished until inflation is again treated honestly on both sides of the ledger.