In the weeks leading up to the 2012 legislative session, Minnesota Management & Budget (MMB) announced a surprising $876 million surplus. Minnesota's constitution requires a balanced budget, and with black ink in the books, legislators were not forced into budget negotiations with the Governor. They also were not able to spend the surplus because state law required the cash to be directed into the state's reserve and cash flow accounts. The news wasn't all good, though. MMB Commissioner Jim Showalter announced in February that despite current surplus revenue, the budget forecast for 2014-2015 remained $1.1 billion in deficit. Minnesota's biennial budget tops out at approximately $33 billion.

The first year of Minnesota's legislative biennium is known as the "budget" year, and the deficit will make 2013 a challenging budget year to resolve. Regardless of who controls the legislature, it won't be by enough to make the solution as simple as raising taxes or cutting spending. Fortunately, the July Economic Report issued by MMB contained some good news. State revenues are up 2.1%, or $336 million, and Minnesota's economic growth, ranked 15th best, continues to outpace the national average. Income and corporate tax revenues grew substantially more than predicted after years of little growth or decline. The extra revenue doesn't necessarily equate to a diminishing state budget deficit. We will not have a comprehensive budget analysis until the November MMB budget forecast. Then we will know if revenue continued growing, what state spending looked like and what became of February's predicted deficit.