The state’s revenue collections and cash flow accounts are performing as expected or better, officials from Minnesota Management and Budget told the Legislative Advisory Commission Thursday, but worries about potential money shortages and the poor economy still persist.
At a hearing before the commission, MMB Commissioner Jim Schowalter said that while the state expects to see low points in its cash flow account in coming weeks and months, he doesn’t expect to have to borrow to meet spending this year or in fiscal year 2012.
The testimony — see the presentation handout here — largely reviewed MMB’s recently completed cash flow projections that showed a diminished threat of the state running out of money, but the possibility of uncomfortably low levels of leeway at times this fall and next spring. See more on that report from Capitol Report here.
At the hearing, which included members Senate Majority Leader Amy Koch, House Speaker Kurt Zellers, Senate Finance Chair Claire Robling and House Ways and Means Chair Mary Liz Holberg, Schowalter said the state’s cash flow numbers were “at or above what they were at the prior year” and largely included “improved numbers” over leaner projections.
Still, Schowalter sounded a somewhat cautious note, and asked that the commission approve his use of the state’s line of credit if other money management tools failed. “Cash management is an issue for the state, and it’s something we need to keep our eye on,” he said.
The commission unanimously approved that recommendation through next June.
More broadly, though, the officials from MMB — particularly state economist Tom Stinson — had some worrisome news on the state’s fiscal future in light of the still-struggling economic recovery and increasing chance that the U.S. could face another recession.
Echoing a tone he struck in talking with Capitol Report in August, Stinson said that while state revenues are still meeting or exceeding projections that were made in the February forecast earlier this year, there’s growing concern that any further deterioration in the economy — thanks to factors ranging from gas prices and the European debt crisis to gridlock in Washington — could drive down growth and leave the state with diminishing revenues.
Stinson said, for example, that if a 2010 payroll tax cut was not extended into 2012, already meager economic growth — projected to be about 1.5 percent — could be reduced by a full percentage point. “That’s no growth at all,” Stinson said.
Looking forward, all eyes will be on the November forecast, which will provide an updated picture of the state’s fiscal outlook in light of recent economic activity.