PoliGraph: Claims about the budget surplus
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Republicans and Democrats agree that the state has a nearly $1.9 billion surplus – close to $900 million more than previously projected.
But for political reasons, they're focusing on different reasons why.
Democrats claim the surplus is due to more people working, which means more revenue for the state.
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Republicans say the surplus is due people having more money to spend.
PoliGraph examined two claims on both sides of the debate and found that they have truth to them – but that they also leave out some important facts.
The Evidence
“Our state has led the nation’s economic recovery. Our success has produced this surplus. It hasn’t come from higher tax rates, as some will claim… This surplus comes from more Minnesotans working than ever before in our state’s history, and more of them earning higher incomes than ever before.” – Gov. Mark Dayton, Feb. 27, 2015.
Dayton is correct that Minnesota has been at the forefront of the economic recovery. For instance, the state’s unemployment rate is – and has been – well below the national average.
And he’s also correct that the surplus didn’t come from the higher taxes his administration imposed on Minnesota’s wealthiest earners. That new rate was already baked into previous budget forecasts, so it didn’t impact that latest analysis.
Dayton is also on point that more Minnesotans are working than ever before. According to the Department of Employment and Economic (DEED) recovery, 2,886,343 people have jobs. That’s the highest number on record based on the latest available data, though employment in Minnesota fluctuates from month to month.
He’s on shakier ground when it comes to wages, though. According to the state officials and the U.S. Census, wages are going up in Minnesota. But adjusted for inflation, wages haven’t budged since the recession, according to DEED.
The crux of Dayton’s argument is that these factors have come together to boost Minnesota’s surplus in the next biennium from $1 billion to nearly $1.9 billion, and that’s correct. The surplus is largely due to higher revenue from higher wages and higher sales tax from more consumer spending.
Dayton doesn’t mention that lower state spending and low gas prices are also factors.
“Low gas prices leave more money in the pockets of Minnesota families, and that is what improves Minnesota’s economy. That is what [the surplus] is due to.” – GOP House Speaker Kurt Daudt
The latest budget forecast makes clear that lower gas prices have helped people financially in Minnesota and nationally, and are contributing to the nation’s overall economic recovery.
“Cheap gasoline means big savings for Minnesotans,” the forecast states.
How much? Minnesota Management and Budget economists estimate that if oil prices continue to average near $50 a barrel in 2015, Minnesota households will save on average $1,100 this year.
Repeatedly during a press conference last week, Daudt attributed Minnesota’s recovery and surplus to low gas prices and the fact that Minnesotans have more money to spend overall. Because of that, Daudt argued that Democrats should abandon their plan to raise the gas tax to pay for new road construction projects and support tax cuts instead.
But like Dayton, Daudt glosses over some details.
First, the forecast doesn’t say is how much the low gas prices have contributed to the state’s surplus in the form of more robust spending and higher sales tax revenue. What the state does know is that revenue from sales is small compared to revenue from individual income tax revenue.
Daudt also skirts around the important facts that the bulk of the surplus is coming from lower than expected state spending, and higher than expected income tax revenue resulting from job growth and higher wages.
The Verdict
Both Gov. Dayton and Speaker Daudt make valid points about Minnesota’s expanding budget surplus, but they focus on different reasons for the surplus.
Dayton emphasizes more jobs and higher wages as a factor, and that's true.
But he leaves out details about higher sales tax revenue and lower state spending.
As for Daudt, lower gas prices are certainly putting more money in many Minnesotans’ pockets, but there’s more behind the job growth that is swelling state coffers.
As a result, both Dayton and Daudt earned an accurate for their claims.