Friday, February 10, 2012

The Power of Projections

When it comes to state and local politicians, what's the biggest influence on how craft their speeches, interviews and talking points? What drives them to go on the offensive about issues, or play it safe and wait out the storm?

In Minnesota, I would argue that it's Minnesota Management and Budget (MMB). Depending on how MMB forecasts projected revenue, politicians are either pointing fingers because of the deficits they face or trying to claim responsibility for glorious budget surpluses.

A classic case of this was seen in 2011. Due to MMB's projected deficit of $5 billion for the state, legislators spent months agonizing over where to cut the budget, or how to raise revenue. The key problem: healthcare and human services expenditures had a $2 billion funding gap.

After months of fighting and a 20-day state government shutdown in July, legislators finally agreed to borrow money against future tobacco payments. All sides left the debacle bruised, and public satisfaction with their local officials sunk.

Fast forward to December of 2011. MMB announces that the state now has a projected $876 million surplus, and that they had over-projected health and human services expenditures, among other things. A variety of local officials are now claiming credit for the surplus, when in fact, they did nothing to change the structure of the budget. The surplus will seemingly allow politicians to focus on issues instead of budgets.

It looks like MMB's projections about the surplus are still on track, but who knows what February's projections will bring. One thing's for sure: whatever MMB says will set the tone for the entire spring session.

1 comment:

  1. Justin, the video is really nice! A little question -- how would you relate the MMB discussion with the weekly topic of revenue analysis?