House Ways and Means Committee 12/9/19


>>I WOULD LIKE TO CONVENE THE WAYS AND MEANS COMMITTEE. WERE DELAYED I DON’T KNOW WHAT PROBLEMS WERE WE HAD A TEAM WORKING ON SOME TECHNOLOGY OTHERWISE WE WOULD HAVE STARTED EARLIER. WE DO HAVE A QUORUM PRESENT. REPRESENTATIVE HERTAUS/.>>THANK YOU MR. CHAIR I WANTED TO EXPRESS MY THANKS PERHAPS ON BEHALF OF OUR CAUCUS MAYBE ALL THE PEOPLE IN HERE FOR YOUR WISDOM AND INTELLECT AND INTUITION AND COLIN IS MEETING TO ORDER AT 1030 YOU MUST KNOW THERE WAS GOING TO BE SNOW EVEN TODAY?>>I HAVEN’T LIVED ANYPLACE OTHER THAN MINNESOTA SO YOU SORT OF ARE CAUTIOUS THIS TIME OF YEAR LET ME PUT IT THAT WAY. THAT WAS ACTUALLY I HAVE TO GIVE CREDIT TO THE WOMAN TO MY RIGHT; SHE MADE THAT SUGGESTION. …LAUGHTER… I CAN’T TAKE CREDIT FOR THAT BUT IT’S A GOOD IDEA THIS TIME OF YEAR.>>IT TOOK AN HOUR AND 50 MINUTES ONE WAY HERE THAT WAS A GOOD THING I DIDN’T COME TO A COMPLETE STOP EVER.>>I FOUND EVEN THOUGH IT WAS STARTING AT 1030 I LEFT HOME SHORTLY AFTER 7:00 A.M. THIS MORNING TO MAKE SURE I WAS HERE BECAUSE I WATCHED THE EARLY MORNING NEWS THERE WERE TALKING ABOUT ACCIDENTS AND SPIN OUT AND SO WANT WE HAVE TO GIVE SOME CREDIT WE HAVE SOME FOLKS HERE FROM NORTHERN MINNESOTA WHO MADE IN THROUGH THE WORST OF IT LAST NIGHT AND THIS MORNING. HOW WAS IT IN DULUTH?>>MR. CHAIR I CAME DOWN LAST NIGHT I SAW THE WEATHER FORECAST AND I KNEW REPRESENTATIVE ECKLUND WAS GOING TO BE HERE SO I HAD TO BE HERE.>>DID YOU COME DOWN LAST NIGHT?>>I DID MR. CHAIR.>>I HOPE WE HAVE IN THE NORTHERN MINNESOTA MEMBERS HERE OR NOT? WE DO HAVE A QUORUM AND THANK-YOU TO EVERYONE WHO IS HERE. WE WILL GET STARTED; WE DON’T HAVE ANY MINUTES IN THE PACKETS WE WILL APPROVE PREVIOUS MINUTES WHEN WE CONVENE IN FEBRUARY ON THE FEBRUARY 11TH OR SHORTLY THEREAFTER WILL HAVE THE FIRST COMMITTEE MEETING WE WILL TAKE UP THE PREVIOUS MINUTES. WE ARE GOING TO HAVE AN OVERVIEW OF THE BUDGET WE PASSED AT A FAIR AMOUNT OF PUBLICITY ON IT ALREADY FROM LAST WEEK THE WAYS AND MEANS COMMITTEE UNDER THIS PROCESS SHORTLY AFTER THE FORECAST COMES OUT; WE DO HAVE MMB COME IN AND GIVE US AN OVERVIEW. OK. MISS CONLEY POINTED OUT SHE MADE AN ERROR ON THE AGENDA. IT IS THE NOVEMBER FORECAST NOT THE FEBRUARY FORECAST WE’RE TALKING ABOUT. THAT WOULD BE LITTLE EARLY BUT WE WILL LET THE HEARING IN A COUPLE OF MONTHS ON THE FEBRUARY FORECAST. IF THE FOLKS WHO ARE GOING TO TESTIFY COULD COME FORWARD. COMMISSIONER FRANS ARE YOU GOING TO BE THE LEAD OF? YOU ARE LISTED FIRST.>>MR. CHAIR I WILL TRY. I WILL ” WE HAD ENOUGH TO THE SMART PEOPLE BESIDE ME TO GET THE INFORMATION YOU WOULD LIKE. THANK YOU MR. CHAIR GOOD MORNING TO MEMBERS FOR BEING HERE TODAY. WE’RE HAPPY TO PRESENT THE NOVEMBER FORECAST TO DATE AND WE WILL WAIT A FEW MOMENTS FOR THE FEBRUARY FORECAST ONE OF THE THINGS THAT’S SO CRITICAL ABOUT TODAY’S LAST WEEK’S FORECAST WAS IT CAME AT A TIME WHEN WE WERE ABLE TO MAKE A CONTRIBUTION OR ALLOCATION TO THE BUDGET RESERVE ACCOUNT I WILL TALK FURTHER ABOUT. AS WE SAID LAST WEEK THE BUDGET OUTLOOK FOR MINNESOTA HAS IMPROVED DR. KALAMBOKIDIS; I SHOULD DO SOME LAPS AROUND THE CAPITAL; WILL TALK ABOUT THE ECONOMIC ASPECTS AND BRIDGET REITAN THE BUDGET DIRECTOR WILL TALK ABOUT THE EXPENDITURE SIDE. ONE OF THE THINGS WE’RE PLEASED TO SEE WAS THE $1.3 BILLION SURPLUS FORECASTED FOR 20-21 PROVIDED ENOUGH BALANCE TO MAKE A PAYMENT TO THE ALLOCATION TO THE BUDGET RESERVE AND AND WE’VE HIT A BUDGET RESERVE TARGET OF ALMOST $2.4 BILLION WHICH IS WHAT WE WERE STRIVING TO GET YOU TO HAVE A RAINY DAY FUND IN THE EVENT WE HAVE AN ECONOMIC DOWNTURN. ONE OF THE THINGS WE TALKED A LITTLE ABOUT LAST WEEK WAS THE FACT THAT SO MANY STATES HAVE BEEN STARTED USING THE SETTING UP MORE SIGNIFICANT RAINY DAY FUNDS ACROSS THE COUNTRY AND THAT HAS ALLOWED THEM TO AVOID THE DIFFICULTY THAT MANY OF US AROUND THE TABLE I SEE A LOT OF FAMILIAR FACES FROM 2011 WHERE WE WENT TO THAT SITUATION WHERE YOU HAVE A LARGE DEFICIT AT THAT TIME $6.2 BILLION IN YOU HAD TO MAKE CHANGES AND HAD TO MAKE THEM VERY QUICKLY. UNDER THIS SCENARIO WE PUT FORWARD WITH OUR BUDGET RESERVE WILL TALK OF LITTLE MORE ABOUT THAT LATER PROVIDED SOME FLEXIBILITY IN THE EVENT OF AN ECONOMIC DOWNTURN. THE OTHER THING I WANTED TO MENTION WAS THE BUDGET RESERVE POLICY WE HAVE IS BASED UPON THE A PERCENTAGE OF THE GENERAL FUND REVENUES IN THE BIENNIUM SO THAT PROVIDES SOME FURTHER PROTECTION AGAINST THE RISK OF A GROWING BUDGET AS THE BUDGET GROWS SO DOES THE TARGET BECAUSE THE PERCENTAGE OF REVENUES SO EVERY NOVEMBER OR EARLY SEPTEMBER DR. KALAMBOKIDIS TEAM ANALYZES THE VOLATILITY AND WHETHER THE REVENUE IS CHANGED AND WHETHER THE PERCENTAGE SHOULD CHANGE OR NOT IT’S ONE WAY WE PROVIDE SOME RISK ANALYSIS ABOUT WHAT HAPPENS IN THE EVENT REVENUES CHANGED DRAMATICALLY. WITH THAT ONE WOULD LIKE TO DO NOW IS TURNED OVER TO BUDGET DIRECTOR REITAN TO WALK THROUGH THE PROJECTED BALANCE THE BUDGET RESERVE AND GO ON FROM THERE.>>I SHOULD ASK COMMISSIONER; IS IT YOUR PREFERENCE AT DO YOU WANT TO HAVE YOUR TEAM ENTERTAIN QUESTIONS AS A GOAL LONG ORDEAL WANT TO WAIT UNTIL YOU’RE DONE WITH THE PRESENTATION? AS CHAIR I CAN GO EITHER WAY.>>MR. CHAIR IS THE PREROGATIVE OF THE CHAIR WE’RE HAPPY TO TAKE QUESTIONS AS WE GO ALONG.>>WHY DON’T WE FIND SOME MIDDLE GROUND UNLESS YOU HAVE A REAL PRESSING QUESTION AS YOUR DOING THE PRESENTATION WE WILL WAIT UNTIL THE END OF QUESTIONS AND THEN IF NECESSARY WE CAN ENTERTAIN A QUESTION OTHERWISE WE WILL TRY TO WAIT UNTIL YOU FINISH.>>MR. CHAIR THIS PRESENTATION SHOULD GO FAIRLY QUICKLY . I THINK WE’LL GET TO THAT END IT PRETTY QUICKLY.>>GOOD MORNING I’M BRITTA REITAN STATE BUDGET DIRECTOR AT MMB. I WILL WALK THROUGH A HIGH LEVEL LOOK AT THE NUMBERS FOR FISCAL YEARS 20 AND 21 WITH THE SLIDE IS SHOWING IS THE CHANGE IN THE BUDGETARY BALANCE IN 20 AND 21. THIS COMPARES THE END OF SESSION ESTIMATES TO THE CURRENT ESTIMATES IN THE FORECAST. THE RIGHT-HAND COLUMN REFLECTS THE CHANGE BETWEEN THE END OF SESSION AND THE FORECAST. THE BOTTOM ROW THE CHART SHOWS THE BUDGETARY BALANCE IN THE MIDDLE COLUMN THAT’S WHERE YOU CAN SEE THE CURRENT PROJECTION OF $1.3 BILLION THAT’S AVAILABLE FOR 20 AND 21 AND THIS WAS AN INCREASE OF JUST OVER $1 BILLION FROM THE END OF SESSION ESTIMATES AND THIS IS ALSO AFTER THE ADDITIONAL ALLOCATION OF THE BUDGET RESERVE. AS YOU CAN SEE IN THE CHANGE; THE BIGGEST DRIVER OF THE CHANGE IS $891 MILLION IN INCREASE IN THE CARRY FORWARD INTO THE BEGINNING BALANCE THIS IS MONEY CARRYING FORWARD FROM THE CLOSE OF FISCAL YEAR 2019 AND ATTRIBUTING AN INCREASE TO THE BEGINNING BALLOTS FOR 20 AND 21. OF THAT $891 MILLION THE MAJORITY IS DUE TO HIGHER TOTAL REVENUE THAN PREVIOUSLY FORECASTED IN FISCAL YEAR 19 REVENUE PROJECTIONS ARE ALSO INCREASING IN THE FORECAST FOR THE CURRENT BIENNIUM IN YEARS 20 AND 21 OF $501 MILLION AND EXPENDITURE ESTIMATES HAVE DECLINED ONLY SLIGHTLY BY $7 MILLION WE WILL TALK MORE ABOUT THE DRIVERS OF THOSE CHANGES LATER IN THE PRESENTATION. THE NEXT LINE SHOWS THE CHANGE IN THE BUDGET RESERVE; UNDER EXISTING STATUTE WE ALLOCATE 33 PERCENT OF THE BALANCE OR THE AMOUNT NECESSARY TO REACH THE RESERVE TARGETS IN THIS CASE WE ALLOCATED THE AMOUNT NECESSARY TO REACH THE RESERVE TARGET AND THE TARGET IS $2.3 BILLION CURRENTLY SO WE ALLOCATED $284 MILLION TO THE RESERVE. THE NEXT LINE SHOWS $350 MILLION IN THE CASH FLOW ACCOUNTS AND THIS IS UNCHANGED FROM AND A SESSION ESTIMATES. THEN THE NEXT LINE SHOWS THE CHANGE IN THE STADIUM RESERVE BALANCE THE BALANCE IS PROJECTED TO INCREASE BY $25 MILLION IN FISCAL YEARS 20 AND 21 REACHING $124 MILLION BY THE END OF 2021. THIS IS DUE TO INCREASED GRAMBLING TAX PROJECTIONS FROM THE PREVIOUS FORECAST AND AGAIN THE BOTTOM LINE SHOWS THE BUDGETARY BALANCE OF $1.3 BILLION. THIS NEXT SLIDE PROVIDES A BIT MORE DETAIL ABOUT THE ALLOCATION TO THE BUDGET RESERVE FROM THE FORECAST. THE BUDGET RESERVE LAW PASSED IN 2014 ESTABLISHES A RESERVE TARGET THAT ANNUALLY DETERMINED WHEN THE COMMISSIONER TALKED A BIT ABOUT THAT IT’S BASED ON AN ASSESSMENT OF THE VOLATILITY IN OUR REVENUE STRUCTURE AND AN ESTIMATE DONE BY DR. KALAMBOKIDIS AND HER TEAM EVERY SEPTEMBER THE TARGET IS NOT A DOLLAR A MONTH IT’S A PERCENTAGE OF TOTAL REVENUES IN THE GENERAL FUND. CURRENTLY THE TARGET IS 4.9% OF BIENNIAL REVENUES. GIVEN THE CURRENT REVENUE PROJECTIONS THE RESERVE TARGET=$2.3 BILLION PRIOR TO THE FORECAST WE HAD JUST OVER $2 BILLION IN RESERVES. BEFORE THE ALLOCATION TO THE RESERVE THE FORECAST BALANCE IN FISCAL YEARS 20 AND 21 IS $1.6 BILLION AS I SAID STATUTE DIRECTS AT 33 PERCENT THE AMOUNT TO REACH THE RESERVE TARGET IN THIS CASE IF WE HAD DONE A 33 PERCENT IT WOULD OF BEEN $533 MILLION WE DID NEED TO ALLOCATE THAT MUCH TO REACH THE TARGET; SO THE ALLOCATION TO THE RESERVE WITH THE FORECAST IS $284 MILLION NOW I WILL HAND OVER TO DR. KALAMBOKIDIS TO WALK THROUGH THE ACADEMY AND REVENUE FORECAST CHANGES.>>THANK YOU I’M LAURA KALAMBOKIDIS THE STATE ECONOMIST I’M GLAD TO BE HERE TODAY TO TALK ABOUT THE ECONOMIC AND REVENUE FORECAST. I WILL START WITH THE U.S. ECONOMY I WILL MOVE TO THE MINNESOTA ECONOMY AND THEN TALK ABOUT THE REVENUE CHANGES. THE FIRST CHART COMPARES THE CURRENT U.S. GDP FORECAST OUR CONSULTING FIRM IHS TO THEIR PRIOR FORECAST THE DARK BARS SHOW THE HISTORY AND CURRENT NOVEMBER 2019 FORECAST THE LIGHTER BARS SHOAT THE FEBRUARY FORECAST THE ONE THAT INFORM OUR PRIOR FORECAST IF YOU FOCUS ON THE RIGHT-HAND SIDE OF THE CHART; THE YEARS 19 THROUGH 23 YOU CONCEDE THE OUTLOOK FOR U.S. ECONOMIC GROWTH THIS YEAR FOR THIS YEAR AND SLIGHTLY WEEKEND AND OUTLOOK FOR THE REMAINING YEARS OF OUR FORECAST IS SLIGHTLY IMPROVED SINCE OUR FORECAST WAS LESS PREPARED IN FEBRUARY. LOWER ACTUAL GROWTH FOR MOST OF THIS YEAR IS THAT I JUST LOWER THEIR EXPECTATIONS FOR 2019 REAL GDP GROWTH 0.4% IN THE FEBRUARY OUTLOOK DOWN TO 2.3% NOW THE OUTLOOK FOR GROWTH IN EACH YEAR FROM 2323 IS HIGHER THAN IN FEBRUARY; DRIVEN PRIMARILY BY A STRONGER CONSUMER SPENDING FORECAST. IF YOU LOOK THE CURRENT FORECAST FOR 19 THROUGH 23 THE DARK BARS ON THE RIGHT-HAND SIDE OF THE FORECAST; BUT CHART YOU CAN SEE THE PATTERN OF SLOWING GROWTH THROUGH OUR PLANNING HORIZON CARRYING OVER FROM THE PRIOR FORECAST THAT SLOWDOWN OCCURRED A DECELERATION GOING FROM 2.9 PERCENT DOWN TO 1.5% THAT THE SLOWING OCCURS AS THE CONTRIBUTION TO GROWTH FROM FEDERAL FISCAL STIMULUS DECLINES TARIFFS AND TRADE POLICY UNCERTAINTY UNDERMINE BUSINESS INVESTMENTS INTEREST RATES GRADUALLY RISE AND GROWTH IN HOUSEHOLD WEALTH FLOWS SO HOUSEHOLD WEALTH GROWS BUT AT A SLOWER PACE. AFTER MID 2020 HAD DECLINED IN THE U.S. LABOR FORCE PARTICIPATION RATE THE DEMOGRAPHIC DRIVEN IT’S ABOUT BABY BOOMERS RETIRING THAT THE CLIENT FOR THE SLOWS THE ECONOMY AND. DOWNSHIFT CONTINUES WITH AND YOU REAL GDP GROWTH EXPECTED TO DECELERATE FROM 2.9% ANNUALLY IN 2018 DOWN TO 1.5% IN 23 THE HISTORY OF THE CHART AND SINCE THE RECESSION; ILLUSTRATES ONE OF THE RISKS OF THE FORECAST THE DOLLAR BUYING AS A SHOWED YOU BEFORE IS AT 3.1 PERCENT THAT’S ANNUAL AVERAGE REAL GDP GROWTH FOR THE 20 YEARS PRIOR TO THE RECESSION AND THE POINT THERE IS TO ILLUSTRATE THE GROWTH WE USED TO BE ABLE TO EXPECTED HIGHER THAN THE GROWTH WE ARE EXPECTING GOING FORWARD. WHEN THE ECONOMY IS GROWING SLOWER THIS THAT AS MUCH MARGIN FOR ERROR IT’S HARD TO RECOVER FROM A SETBACK OR NEGATIVE SHOCK THEN WHEN THE GROWTH IS HIGHER. IN ADDITION U.S. EXPANSION IS NOT AS LONGEST ON RECORD SO MATURE LOW GROWTH EXPANSION IS PARTICULARLY VULNERABLE WHEN NEGATIVE SHOCKS OCCUR. RELATIVELY SMALL CHANGES IN THE U.S. GDP FORECAST IS THE RESULT OF SOME OFFSETTING CHANGES SINCE OF THE COMPONENTS OF THE GDP. SPECIFICALLY A STRONGER FORECAST FOR CONSUMER SPENDING; THE STRONGER FORECAST FOR CONSUMER SPENDING OFFSET LOWER EXPECTED GROWTH IN BUSINESS INVESTMENTS. SHOWS THE FORECAST CHANGE FOR U.S. GROWTH AND CONSUMER SPENDING THE GRAY BARS SHOW THE FEBRUARY OUTLOOK THE DARK BARS SHOW THE CURRENT OUTLOOK CONSUMER SPENDING CONSTITUTES ABOUT TWO-THIRDS OF REAL GDP IHS EXPECTS CONSUMERS TO REMAIN THE PRIMARY CONTRIBUTOR TO GROWTH IN THE ECONOMY. IHS HAS RAISED THEIR EXPECTATIONS FOR REAL CONSUMER SPENDING GROWTH BETWEEN 0.4 IN 0.8% IN EACH OF THE FORECAST AND THAT INFLUENCES OUR FORECAST FOR MINNESOTA’S SALES TAX RECEIPTS. THE STRAWSER FORECAST GROWTH AND A STRONGER CONSUMER SPENDING FORECAST IS SUPPORTED BY RISING INCOMES FALLING GASOLINE PRICES AND LOWER INTEREST RATE PASSED SO INTEREST RATES ARE EXPECTED TO RISE BUT RELATIVE TO THE PRIOR FORECAST THE PATH IS LOWER AND RISING HOUSEHOLD WEALTH WHEN WEALTH GROWS FOR EXAMPLE FOR AMERICANS THE WEALTH IS PRIMARILY THE VALUES OF THEIR HOME AND VALUES OF RETIREMENT SAVINGS STOCK MARKET PORTFOLIOS AND FINANCIAL ASSETS; WHEN WEALTH GROWS FROM RISING HOME VALUES IN FINANCIAL ASSET VALUES CONSUMERS TEND TO SPEND MORE AND THAT POSITIVE WEALTH EFFECTS HAS BEEN AN IMPORTANT CONTRIBUTOR TO ECONOMIC GROWTH DURING THIS EXPANSION BUT IT IS AT RISK IF WEALTHY CLIENTS OR POLICY UNCERTAINTY MAKES CONSUMERS JITTERY. THE STRAWSER FORECAST IN REAL CONSUMER SPENDING AS A SAID OFFSET THE REDUCED FORECAST FOR BUSINESS INVESTMENT AND THAT HAS BEEN ENCUMBERED BY A SLOWDOWN IN MANUFACTURING INCLUDING DECLINING MANUFACTURING EMPLOYMENT AT THE U.S. LEVEL; BUT STRONG U.S. DOLLAR DAMPENS DEMAND FOR EXPORTS AND TRADE POLICY UNCERTAINTY. NOT KNOWING WHAT THE FUTURE TRADE POLICY A PLAYING FIELD LOOKS LIKE MAKES BUSINESS OWNERS POSTPONED EXPANSION PLANS AND POSTPONE INVESTMENTS. NOW WE MOVE TO MINNESOTA AND COMPARE MINNESOTA TO THE U.S. AND THIS CHART I COMPARE THE HEADLINE OUT OF ONE A GREAT UNITED STATES TO MINNESOTA OF THE U.S. IS THE LIGHT LINE AND MINNESOTA’S THE DARKLING THE VERTICAL BARS ARE THE RECESSION’S. THE WHITE SPACE BETWEEN THE BARS REPRESENTS THE RECOVERY AND EXPANSION TIMES BETWEEN RECESSIONS MINNESOTA STEADY ECONOMIC PERFORMANCE CONTINUES EVEN AS THE U.S. EXPANSION HAS SURPASSED THE RECORD LENGTH. THROUGHOUT THE EXPANSION MINNESOTA HAS STEADILY ADDED JOBS DRIVING ON A PLANET RATES WELL BELOW THE U.S. RATE MINNESOTA’S UNEMPLOYMENT RATE REACHED AN 18 YEAR LOW OF 2.8% IN JUNE OF 2018 IT BEGAN GRADUALLY RISING AT A YEAR AGO REACHING THE CURRENT RATE OF 3.2% THAT 0.4% BELOW THE U.S. RATE. THE RECENT INCREASE AS A CONCESSION THE RIGHT-HAND SIDE OF THE CHART IS TO INCREASE FROM DECEMBER 18TH THE RECENT INCREASE IN OUR UNEMPLOYMENT RATE COINCIDES WITH AN INCREASE IN OUR LABOUR FORCE PARTICIPATION RATE WHICH IS THE SHARE OF THE OVER 16 POPULATION THAT’S EITHER WORKING OR LOOKING FOR WORK. WORKFORCE PETITION IS CONSISTENTLY ABOVE THE U.S. RATE AMONG THE HIGHEST IN THE STATES BUT SINCE DECEMBER 2018 ITS ENTIRE TO REACH 70.3% WHICH IS SEVEN PERCENTAGE POINTS ABOVE THE U.S. RATE AND THE SECOND HIGHEST AMONG U.S. STATES ” INCIDENTAL UPTICKS IN THE UNEMPLOYMENT RATE AND LABOR FORCE PARTICIPATION RATE MEANS THAT WE HAVE SOME NEW ENTRANT INTO THE WORKFORCE AND SOME OF THOSE NEW ENTRANTS DIDN’T IMMEDIATELY FIND JOBS. GREAT EFFORTS TO MATCH THEM TO JOBS WILL LOWER THE UNEMPLOYMENT RATE IN SUPPORT EMPLOYMENT GROWTH. THIS CHART ILLUSTRATES ANOTHER ASPECT OF MINNESOTA’S TIGHT LABOR MARKET THE GRABARSKI HAD A GREAT OURS SHOWS THE TOTAL NUMBER OF UNEMPLOYED WORKERS SO THE NUMBER OF WORKERS ASSOCIATED WITH THE RATE YOU SAW ON THE PREVIOUS CHART AND A RADAR SHOWS THE NUMBER OF JOB VACANCIES AND BOTH OF THESE NUMBERS ARE STATEWIDE. I’VE GIVEN YOU SOME HISTORY ON THIS CHART YOU CAN SEE HOW DIFFERENT THE RELATIONSHIP TWEEN THE NUMBER OF UNEMPLOYED WORKERS IN JOB VACANCIES WAS PRIOR TO THE RECESSION ESPECIALLY DURING THE RECESSION. THE DARK BARS YOU CAN SEE THAT THE BAR AND THE LAST DATE OF ONE OF THE CHARTS THE 19 DID YOU CONSIDER GRADE BAR HAS GONE UP A LITTLE THAT’S THE UPTICK IN UNEMPLOYMENT I MENTIONED BEFORE WE’VE ADDED A FEW MORE UNEMPLOYED WORKERS THAT WE HAD BEFORE THE NUMBER OF JOB VACANCIES HAS ALSO INCREASED AND THAT NUMBER OF JOB VACANCIES HAS RISEN TO A HIGH LEVEL ILLUSTRATING THERE’S HIGH DEMAND FOR WORKERS IN MINNESOTA. THE LAST FEW YEARS THE RATIO OF UNEMPLOYED JOB SEEKERS TO OPEN POSITIONS ACROSS THE STATE HAS BEEN LESS THAN ONE SO A MEASURE OF THE TIGHT LABOR MARKET MEANING THERE ARE FEWER UNEMPLOYED JOB SEEKERS THAN THERE ARE OPEN POSITIONS ACROSS THE STATE. THAT RATIO IS NOW 0.7 THE TIGHT LABOR MARKET IS BEING FELT ACROSS MINNESOTA IN BOTH THE TWIN CITIES AND GREATER MINNESOTA HALF YOUR UNEMPLOYED PERSONS PER JOB VACANCY FEW UNEMPLOYED PERSONS IN JOB VACANCIES. THE LARGE NUMBER OF OPEN POSITIONS ACROSS THE STATE AS I SAID AT A STRETCH OF STRONG DEMAND FOR LABOR AND WE EXPECT THAT DEMAND TO PERSIST AS LONG AS THE U.S. EXPANSION DOES. THE BABY BOOMERS’ RETIREMENTS HAVE MADE IT DIFFICULT TO DANCE TO THE MAT WITH INCREASED LABOR SURPRISE RECENT INCREASES IN MIGRATION TO THE STATE ; THE PERFECT TIME AND REPRESENTS A BRIGHT SPOT FOR MINNESOTA’S ECONOMIC OUTLOOK OF THE LAST TWO YEARS FROM 17 AND 18 THE LAST TWO YEARS OF DATA MINNESOTA HAS ATTRACTED MORE NEW RESIDENTS THEN WE LOST TO OTHER STATES REVERSING A 15 YEAR TREND OF NEGATIVE DOMESTIC NET IN MIGRATION AND MAKING IS AN OUTLIER IN THE MIDWEST. NEWCOMERS FROM AROUND THE COUNTRY A RUMMEL WORLD MADE 2017 THE LARGEST DEER FOR NET MIGRATION INTO MINNESOTA IN NEARLY THREE DECADES THAT’S NOT THE ONLY COMPONENT OF POPULATION GROWTH THE LARGEST COMPONENT POPULATION GROWTH IS NATURAL GROWTH WITCHES’ BIRTHS- DEATHS THAT RATE IS ABOUT MIGRATION SPECIFICALLY FINALLY I WILL SUMMARIZE OUR REVENUE FORECAST. TOTAL GENERAL FUND REVENUES FOR THE CURRENT BIENNIUM ARE NOW FORECAST TO BE AS YOU HEARD EARLIER $501 MILLION MORE THAN THE FEBRUARY FORECAST WE HAVE HIGHER THAN EXPECTED FORECAST FOR INDIVIDUAL INCOME TAX SALES TAX AND OTHER TAXES; THE LOWER FORECAST FOR CORPORATE TAX REVENUE THE LARGEST DOLLAR AMOUNT CHANGE IS THE INDIVIDUAL INCOME TAX WHICH IS FORECAST TO GENERATE $493 MILLION MORE IN THE REMAINDER OF FISCAL YEAR 2321 THAN WE ESTIMATED IN FEBRUARY AFTER ADJUSTING FOR 20 19TH LEGISLATIVE CHANGES. WE ENDED FISCAL YEAR 19 WITH MORE INCOME TAX RECEIPTS THAN WE HAD FORECAST INDICATING HIGHER TAX LIABILITY FOR TAX YEAR 2018 WHICH IS THE BASE YEAR OF THIS FORECAST. THE HIGHER BASE WITH STRONGER FORECAST GROWTH IN NON WAGE INCOME RAISED THE INCOME TAX FORECAST A SIMILAR STORY APPLIES TO THE SALES TAX; GENERAL SALES TAX REVENUE FOR THE CURRENT BIENNIUM IS NOW FORECAST TO BE TWO UTTERED $52 MILLION MORE THAN THE PRIOR ESTIMATE THAT INCREASE REFLECTS HIGHER THAN EXPECTED RECEIPTS SO FAR IS IN THIS FISCAL YEAR AND A HIGHER FORECAST FOR TAXABLE SALES COMPARED TO FEBRUARY. THAT’S CONSISTENT WITH THE HIGHER U.S. CONSUMER SPENDING FORECAST I SHOWED EARLIER. CORPORATE FRANCHISE TAX IS EXPECTED TO GENERATE TWO UTTERED $94 MILLION LAST THAN THE PRIOR FORECAST THIS STORY IS THE REVERSE OF THE SALES- TAX STORY; THE REDUCED FORECAST IS RECEIPTS SO FAR THIS FISCAL YEAR BETTER BELOW THE PRIOR FORECAST OF A LOWER FORECAST FOR CORPORATE PROFITS THAT IS FROM THE U.S. MACRO FORECAST. LET ME HIGHLIGHT SOME OF THE RISKS OF THIS FORECAST I MENTION THE RISK TO CONSUMERS WERE THE CHAMPIONS OF THIS ECONOMIC RECOVERY IN THE MAIN SOURCE OF SALES TAX REVENUE. THE RISK THAT GETS BOOKED BY POLICY UNCERTAINTY OR NEGATIVE WEALTH THIS FORECASTING CORPORATE ALL U.S. TARIFFS AND COUNTRIES RETALIATORY MEASURES THAT A BEEN PUT IN PLACE TO DATE AS WELL AS THE DECEMBER 15TH U.S. TARIFFS ON CHINESE IMPORTS U.S. TRADE POLICY ESPECIALLY REGARDING CHINA BUT REGARDING SOME OF OUR OTHER TRADING PARTNERS AS WELL HAS BEEN IN FLUX AND UNCERTAINTY IMPOSES COSTS ON BUSINESSES THAT HAVE TO ADDRESS AT SUPPLY CHAIN DISRUPTIONS. BUSINESSES ALREADY APPEAR TO BE PUTTING INVESTMENT PLANS ON HOLD AND PROLONGED UNCERTAINTY WILL EXACERBATE THE INVESTMENTS SLOWED DOWN ON THE OTHER HAND ALLEVIATION OF TRADE POLICY UNCERTAINTY IS A SOURCE OF UPSIDE POTENTIAL TO THE FORECAST. GEOPOLITICAL EVENTS CAN BE REAL GLOBAL GROWTH THAT SHOWING SIGNS OF SLOWING FOR EXAMPLE THE U.K. EXITS THE EUROPEAN UNION WITHOUT AGREEMENT IS STRUCK INTO EXPORTS COULD FALL AND FINALLY WITH 19 MONTHS BEFORE THE END OF THE CURRENT BIENNIUM EVEN SMALL CHANGES IN ASSUME THE GROWTH RATES AND PARTICULARLY VOLATILE INCOME SOURCES SUCH AS CAPITAL GAINS FOR CORPORATE PROFITS COULD MATERIALLY ALTER THE BUDGET PICTURE TO OUR PLANNING HORIZON. I WILL PASS IT BACK TO THE BUDGET DIRECTOR REITAN.>>THAT YOU ARE BRITTA REITAN STATE BUDGET DIRECTOR WE’RE GOING TO PIVOT TO THE EXPENDITURE SIDE OF THE FORECAST. AS I MENTIONED BEFORE THE EXPENDITURE SIDE SHOWS VERY LITTLE CHANGE OVER ALL SINCE THE END OF SESSION IT’S A $7 MILLION CHANGE HOWEVER THERE IS MORE SIGNIFICANT MOVEMENT IN THIS SPECIFIC BILL AREAS AND THEY’RE OFFSET THE TUSSLE WAIBEL WALK THROUGH SOME DETAILS THERE. HE 12 EDUCATION SPENDING IS $24 MILLION BELOW AND OF SESSION ESTIMATES FOR 2020 WANT THE BIGGEST DRIVER OF THE CHANGE INCLUDES A $30 MILLION REDUCTION IN GENERAL EDUCATION SPENDING COMPARED TO THE PREVIOUS ESTIMATES AND THIS IS DUE TO A DECREASE IN PROJECTED PUPIL GROWTH. PUPILS ARE STILL GROWING BUT NUMBER OF STUDENTS ARE STILL GROWING BUT AT A SLIGHTLY SLOWER PACE THAN OUR PREVIOUS FORECAST. THERE’S ALSO A $60 MILLION REDUCTION IN SPECIAL EDUCATION SPENDING ESTIMATES THIS IS DUE TO SLOWER THAN PROJECTED GROWTH IN DISTRICT SPENDING SO ACTUAL SPENDING AT THE DISTRICT LEVEL WAS SLIGHTLY SLOWER LAST YEAR FOR THE GROWTH IN THE SPENDING WAS SLIGHTLY SLOWER THAN WE PREVIOUSLY PROJECTED. THESE REDUCTIONS ARE OFFSET BY $30 MILLION IN ADDITIONAL SPENDING FOR STATE SAFE SCHOOL PROGRAM IN THE 2019 LEGISLATURE MADE THE SPENDING CONTINGENT UPON THE GENERAL FUND BALANCE AT CLOSE BEING>A WE HAD PROJECTED AT THE END OF SESSION AND THAT WAS IN FACT THE CASE SO THAT CONTINGENT APPROPRIATION FOR STATE SAFE SCHOOL FUNDING WAS MADE IN 20 AND 21 SOME $30 MILLION OF SPENDING FOR SAFE SCHOOLS IT WAS APPROPRIATE THAT WAS NOT COUNTED IN END OF SESSION ESTIMATES SO THAT SHOWN AS AN INCREASE. PROPERTY-TAX AIDS AND CREDITS HAS INCREASED $61 MILLION COMPARED TO PREVIOUS ESTIMATES THIS IS LARGELY DUE TO INCREASE PROJECTIONS FOR THE HOMESTEAD PROPERTY TAX REFUND; AND INCREASE PRODUCTION FOR TAX REFUND INTEREST PAYMENTS. MOVING TO HHS SPENDING; HHS SPENDING IS $97 MILLION BELOW AND OF SESSION ESTIMATES AND IS PRIMARILY DUE TO LOWER ENROLLMENTS IN AT A BASIC CARE PROGRAMS. FOCUSED ON PEOPLE WITH DISABILITIES AND FAMILIES WITH CHILDREN SO THE ENROLLMENT IN BASIC CARE FOR PEOPLE WITH DISABILITIES IS 5.2% LOWER THAN PREVIOUS FORECASTS AND THIS IS DUE TO CONTINUED DIVERSION OF CERTAIN INDIVIDUALS FROM THIS CATEGORY TO THE ADULTS WITHOUT CHILDREN CATEGORY AND THE REASON THIS IS HAPPENING IS THE BARRIERS TO GETTING INTO THE ADULTS WITHOUT CHILDREN PROGRAM ARE LOWER. IT HAS QUICKER AND EASIER ELIGIBILITY FOR INDIVIDUALS AND IT IS NOT REQUIRED A DISABILITY DESIGNATION AND IT HAS HIGHER INCOME AND ASSET LIMITS AND THIS CREATES SAVINGS BEFORE THE STATE BECAUSE IN THE ADULTS WITHOUT CHILDREN CATEGORIES WE RECEIVE A HIGHER FEDERAL MATCH AND THAT WAS GENERATED SAVINGS THERE. ENROLLMENT IN FAMILIES WITH CHILDREN BASIC CARE IS DOWN 1% PER YEAR ON AVERAGE AND IS PRIMARILY DUE TO FAVORABLE ECONOMIC CONDITIONS. MOVING TO THE DEBT SERVICE LINE DEBT SERVICE IS PROJECTED TO BE $51 MILLION BELOW PREVIOUS ESTIMATES; THIS REDUCTION IS PRIMARILY DUE TO LOWER BOND INTEREST RATES THAN WERE PREVIOUSLY FORECAST SO WHEN WE SOLD BONDS IN AUGUST WE HAD LOWER INTEREST RATES ON BONDS THAN WE INCLUDED IN THE PREVIOUS FORECAST AND ALSO IN AUGUST AND A SMALLER BOND SALE THAN WE PREVIOUSLY FORECASTED AS WELL. THE FINAL CATEGORY IS OTHER WHICH CAPTURES ALL THE OTHER BILL AREAS IN THE GENERAL FUND BUDGET. THE SPENDING IN THIS CATEGORY OF $104 MILLION ABOVE AND OBSESSION PROJECTIONS AND THERE ARE TWO MAIN REASONS FOR THIS CHANGE IN THE OTHER BILL AREAS THE FIRST IS OTHER CONTINGENT APPROPRIATIONS WE TALKED ABOUT THE CONTINGENT APPROPRIATION IN THE E-12 BILL AREA THERE WERE TWO OTHERS IN LAW AS A THE END OF SESSION. BECAUSE OUR BALANCE WAS IN FACT GREATER AT THE END OF SESSION THAN WE PREVIOUSLY PROJECTED A CONTINGENT APPROPRIATIONS WERE MADE AND ONE WAS A $20 MILLION APPROPRIATION FOR THE DISASTER ASSISTANCE CONTINGENCY ACCOUNT AT THE DEPARTMENT OF PUBLIC SAFETY THE SECOND WAS $30 MILLION FOR METRO TRANSIT AT THE MET COUNCIL. THE SECOND DRIVER OF THE CHANGE IS $71 MILLION IN UNSPENT APPROPRIATIONS FROM FISCAL YEAR 2019 THAT ARE CARRYING FORWARD TO THE FISCAL YEAR 20 MOST APPROPRIATIONS CANCEL AT THE END OF THE BIENNIUM BUT SOME SPECIFIC APPROPRIATIONS HAVE AUTHORITY TO CARRY FORWARD ACROSS THE BIENNIUM AND WHEN THAT HAPPENS THERE ASSUMING THE MONEY AT THE END OF SESSION FUND BALANCE WE’RE ASSUMING THE MONEY IS GOING TO BE SPENT IN THE YEAR THAT ITS APPROPRIATED BUT WHEN IT CARRIES FORWARD IT INCREASES THE SPENDING ESTIMATES FOR THE BIENNIUM THAT IT CARRIES FORWARD INTO. THE TWO MOST SIGNIFICANT AREAS OF CARRY FORWARD WERE $32 MILLION FOR THE BUSINESS AND COMMUNITY DEVELOPMENT PROGRAMS AND DEED THESE PREPARATIONS ARE ALLOWED TO CARRY FORWARD WITH THE ECONOMIC DEVELOPMENT WORK TAKING A LONGER TIME HORIZON TO PLAN FOR A TO GET PROGRAM SO THOSE APPROPRIATIONS HAVE CARRIED FORWARD AS WELL AS $24 MILLION IN OPERATING A PREPARATIONS FOR THE LEGISLATURE. MOVING TO THE NEXT SLIDE WE RETURN TO A VIEW OF TOTAL REVENUES AND EXPENDITURES IN THE GENERAL FUND. THIS SLIDE PROVIDES THE PLANNING ESTIMATES FOR FISCAL YEARS 22-23 YOU CAN SEE IN THE FIRST COLUMN THE AVAILABLE BALANCE IS $1.3 BILLION FOR 20 AND 21 AND IN THE PRESENTATION OF 22 AND 23; THE $1.3 BILLION IS ASSUMED TO CARRY FORWARD AND WHAT THAT MEANS THE $1.3 BILLION IS PART OF THE BEGINNING BALANCE THAT WE SHOW IN THE SLIDE FOR 22 AND 23 MEANING IT’S BUILT INTO THE 4.1 $6 BILLION SHOWN AS THE BEGINNING BALANCE IN 22 AND 23 THAT MEANS THE $1.90 BILLION THAT’S THE AVAILABLE BALANCE IS PROJECTED AN 22-23 ASSUMES THE $1.3 BILLION IN 20 AND 21 IS NOT SPENT BUT THIS CARRY FORWARD INTO THE 22 AND 23 BIENNIUM. GIVEN THAT IF I CAN BE SOMEWHAT DISTORTING AS PEOPLE LOOK OF THIS WEEK ALSO PROVIDED A BALANCE OF CARRY FORWARD NUMBER AND THAT’S $587 MILLION THAT SHOWS THE IMPACT IF THE $1.3 BILLION WAS SPENT IN 20 AND 21. ALSO IN THE 22- 23; AND WE SHALL FORECAST REVENUES AND EXPENDITURES FOR THE BIENNIUM. WHEN WE COMPARE TO THE FORECAST REVENUES AND FORECAST EXPENDITURES RECALL THAT STRUCTURAL BALANCE BECAUSE WE’RE TAKING OUT OF A CALCULATION THE CARRY FORWARD FROM PREVIOUS YEARS AND ALL THE CHANGES IN THE RESERVE LEVELS WHEN WE’RE LOOKING AT JUST THE COMPARISON OF THE FORECAST EXPENDITURES TO THE FORECAST REVENUES IN 22- 23 WE DO HAVE STRUCTURAL BALANCE IN THE OUT YEARS BUT IS VERY NARROW IT’S TOO HOT TO $20 MILLION THE DIFFERENCE BETWEEN THOSE TWO NUMBERS. MOVING TO THE BUDGET RESERVE LINE THE; CONCEIT THE RESERVE DECLINES IN 22-23 BY $491 MILLION THIS CHANGE IS DUE TO A LAW PASSED LAST SESSION THAT REDUCES THE RESERVE BY $491 MILLION IN FISCAL YEAR 22 IF YOU RECALL THIS WAS DONE TO ENSURE THE PLANNING ESTIMATES IN 22- 23 FOR A BALANCED AT THE END OF LAST SESSION. EVEN THOUGH WE’VE REACHED THE RESERVE TARGET WITH THE CURRENT FORECAST THE RESERVE BALANCE IS SCHEDULED TO BE REDUCED AT THE BEGINNING OF THE NEXT BIENNIUM. THE STADIUM RESERVE LINE SHOWS THE RESERVE IS PROJECTED TO GROW UP TO $240 MILLION BY THE END OF 2023 THIS GROWTH IS DUE TO CONTINUED INCREASES IN PROJECTED GAMBLING TAX REVENUES ALONG WITH THE FACT THAT BEGINNING IN FISCAL YEAR 21 THE STATE BEGINS RETAINING SALES TAX MOVE TO THE CITY OF MINNEAPOLIS THIS TO COVER THE PAYMENTS THE STATE IS CURRENTLY REMITTING ON BEHALF OF THE CITY FOR THE STADIUM EXPENSES. RETURNING TO THE BALANCE OF THE CARRY FORWARD NUMBER OF $587 MILLION AS WELL AS THE OVERALL BUDGETARY BALANCE AND 22-23 OF THE $1.9 BILLION IT’S IMPORTANT TO POINT OUT THE $491 MILLION REDUCTION IN THE RESERVE IS CONTRIBUTING TO THAT NUMBER. IF THE RESERVE WERE TO BE RESTORED IN 22-23 THE NUMBER WOULD BE REDUCED BY $491 MILLION. FINALLY ON THIS SLIDE WE DO INCLUDE AN ESTIMATE OF INFLATION FOR FISCAL YEARS 22 AND 23 AND THIS IS TO GIVE US A SENSE OF THE COST PRESSURES THAT EXIST OUT IN THE PLANNING BIENNIUMS BECAUSE THERE’S NOT A BUDGET SET FOR THOSE YEARS. THE INFLATION IS GENERALLY NOT INCLUDED ON OUR EXPENDITURES SIDE OF THE FORECAST THERE ARE SOME FORMULAS THAT BILL DIDN’T AND INFLATIONARY MEASURE BUT IN MOST CASES THERE IS NOT INFLATION INCLUDED ON THE EXPENDITURE SIDE. THIS IS AN APPLICATION OF THE CPI LEVEL OF INFLATION TO THOSE APPROPRIATIONS IN 22- 23 THAT DO NOT HAVE SOME INFLATIONARY COMPONENT TO THE FORMULA THIS IS TO GIVE A SENSE OF THE COST PRESSURES AND 22- 23. I WILL PASS IT BACK TO THE COMMISSIONER.>>MR. CHAIR AND MEMBERS LET ME SUMMARIZE A FEW POINTS AND THEN (QUESTIONS. I WANT TO TALK ABOUT THREE PRIMARY THINGS AND WE CAN SEE AT THE END WE’VE HIGHLIGHTED A $491 MILLION RESERVE TO CHANGE. ONE OF THE REASONS THE MONEY IS PUT IN THERE IN THE STATUTE REQUIRES THAT BE USED IN THE EVENT OF AN ECONOMIC DOWNTURN AND CHANHASSEN CRITERIA TO BE USED FOR THAT; WE BELIEVE IT’S PRUDENT TO PUT THE MONEY BACK INTO THE RESERVE ACCOUNT FOR THAT REASON IT WAS USED AS BUDGET DIRECTOR REITAN MENTIONED TO HELP US BALANCE 22 AND 23 AT THE END OF SESSION BY GIVING THE RESOURCES WE HAVE WE THINK IT’S A CORPORATE TO PUT IT BACK IN THEIR. THE OTHER THING IS I WANT TO FOCUS A LITTLE ON THE LONG RANGE PLANNING IN MINNESOTA WE PLAN AT LEAST FOR FOUR YEARS SOMETIMES MORE THAN THAT ACTUALLY OF THE GOAL IS IS THAT THE BUDGET FOR ONE YEAR BUT THE BUDGET FOR AT LEAST FOUR YEARS AND LOOK OUT INTO THE HORIZON I THINK THAT’S ONE OF THE REASONS WE’VE BEEN ABLE TO HAVE A SURPLUS AFTER SURPLUS AND ONE OF THE REASONS WE DID AT THE END OF SESSION WAS TO MAKE SURE WE HAD A BUDGETARY BALANCE IN 22 AND 23 WE MADE THE RESERVE CHANGE. KEEPING AN EYE ON THE BALL IN TERMS OF LONG-TERM PLANNING IS WE THINK THE RIGHT THING AND START PAYING WE ALSO BELIEVE CAPITAL BUDGET OF BONDING BILL OR INVESTMENT BILL WHAT EVERYONE TO CALL IT IS ANOTHER SMART INVESTMENT TO MAKE THIS NEXT SESSION. AS YOU KNOW WE DIDN’T MAKE ONE THIS YEAR AND IN 2019 WE BELIEVE GIVEN THE INTEREST RATES WE’RE ABLE TO GET IN AUGUST TRIPLE A INDEX OF FUNDS INDEX FOR INTEREST RATES WE ACTUALLY BEAT THE INDEX IN AUGUST IN TERMS OF WHAT WE WERE LOOKING TO GET FOR BOND SALES 1% AND 2%. WITH THAT KIND OF INTEREST RATES RIGHT NOW WITH THE RESOURCES WE HAVE AVAILABLE WE DO BELIEVE WE CAN MAKE A ROBUST BONDING BILL AND IN THE LONG TERM MAKE SOME OF THESE LONG-TERM INVESTMENTS IN THE STATE OF MINNESOTA THAT WE THINK WILL CONTINUE TO HELP MINNESOTA ATTRACT WORKERS FROM AROUND THE COUNTRY AND AROUND THE STATE AS PROFESSOR KALAMBOKIDIS MENTIONED WE’RE FACING THE WONDERFUL ASPECT OF A POSITIVE NET MIGRATION FROM DOMESTIC FOLKS AND AS WE ATTRACT PEOPLE TO MINNESOTA FOR THE JOBS AND OPPORTUNITIES AND THE BEAUTIFUL WEATHER THAT WE HAVE EVERY DAY SOMETHING ONCE AGAIN WE MIGHT NEED TO THINK OF A LONG-TERM ACCORD TO KEEP THAT TREND HAPPENING AND WE DO BELIEVE INVESTING IN EDUCATION HEALTH CARE AND THOSE THINGS IS THE RIGHT THING TO DO. WE ARE CONCERNED ABOUT INFLATION AS BUDGET DIRECTOR REITAN MENTIONED WE WILL BE LOOKING TO TALK ABOUT WAYS WE SHOULD RESTORE THAT TO THE PROCESS OR TALK ABOUT MAKING SURE WE ACCOUNT FOR THAT BECAUSE INFLATION IS REAL AND IT REALLY DOES MAKE A DIFFERENCE IN OUR BUDGETS. WITH THAT I’M HAPPY TO TURN OVER FOR QUESTIONS.>>COMMISSIONER; I THINK OUR LAST FEW AS YOU WRAPPED UP WITH THE COMMENTS ON THE INFLATION. IF YOU COULD GIVE US A LITTLE BIT OF HISTORY THERE. THERE WAS A TIME WHEN WE DID ADJUST FOR INFLATION AND THEN THERE WAS A CHANGE THE NUMBER OF YEARS AGO AND IF I RECALL I THINK THE COUNCIL OF ECONOMIC DIVISORS IN THEIR REPORT TO LOSS VIRTUALLY WITH EACH AND EVERY FORECAST REMINDED US WE SHOULD INCLUDE INFLATION. BASICALLY MY QUESTION IS WITH THE HISTORY AND WHAT’S IN AND WHAT’S OUT BECAUSE THERE ARE SOME ACCOUNTS THAT ARE ADJUSTED FOR INFLATION AND AND OTHERS THAT ARE NOT. I’M NOT SURE HOW THOSE DECISIONS WERE MADE IN TERMS OF HOW OAT GIVEN ACTIVITIES QUALIFY FOR AN INFLATIONARY ADJUSTMENT AND OTHERS DID NOT?>>MR. CHAIR THANK YOU FOR THE QUESTION. I THINK IT WAS 2002 OR 2003 SOME FOLKS MAY REMEMBER THAT BETTER THAN I WHEN INFLATION WAS REMOVED FROM THE EXPENDITURE PORTION OF THE BUDGET AND IT’S BEEN WAY THAT EVER SINCE. OBVIOUSLY IT’S AN ISSUE WE HAVE SOME CONCERN ABOUT I THINK BUDGET DIRECTOR REITAN TO GIVE YOU A BETTER INDICATION OF WHAT’S IN AND WHAT’S OUT IN THAT CALCULATION.>>AT A HIGH LEVEL I WOULD EXPECT ALL THE DETAILS; JUST A FEW EXAMPLES PERHAPS.>>MR. CHAIR; WHAT INCLUDES INFLATION OF THOSE PLACES WHERE THERE’S A FORMULA IN LAW THAT’S EITHER INCLUDING AN INFLATIONARY MEASURE AN EXAMPLE OF THAT WOULD BE THE SPECIAL-EDUCATION FORMULA IN EDUCATION OR FORMULAS THAT ARE BASED ON COST. THEIR FORMULAS WITHIN OUR HEALTH CARE AREA WHERE WE PAY BASED ON COST AND AS COSTS RISE WE PAY MORE AND INFLATION IS NATURALLY A ACCOMMODATED THROUGH THAT. OUR DEBT SERVICE FORECAST WE PROJECTED DEBT SERVICE PAYMENTS SO THERE’S NO NEED TO APPLY AN INFLATIONARY FACTOR TO THAT. WE LOOK AT THE PLACES WHERE THERE ARE FORMULAS IN LAW THAT WILL BE PAID ON ACTUAL COST AND WHEN WE PROVIDE OUR ESTIMATE OF INFLATION AND EVERYTHING ELSE WE EXCLUDE THOSE FROM THE CALCULATION BECAUSE THEY ALREADY HAVE SOME COMPONENT OF INFLATION BUILT IN.>>FOR EXAMPLE NOW BONDING I THINK WHEN I LOOKED AT YOUR REPORT YOU POINTED OUT THAT WAS FACTORED OUT WOULD BE AN EXAMPLE OF ONE WHEN YOU’RE CALCULATING THE NUMBER OF $1 BILLION PLUS BECAUSE YOU ISSUE BONDS AT THE INTEREST RATE IS FIXED SO THAT’S FACTORED OUT THAN?>>MR. CHAIR THAT IS CORRECT.>>IF I COULD GO BACK TO THE $491 MILLION AND CLARIFY FOR THE COMMITTEE; WHAT IS HAPPENING THERE WAS WITH THE $491 MILLION AND HELP THEM HOW THAT APPLIES TO ADDRESSING THAT ISSUE?>>YOUR CHAIR; THE DEAL THAT WAS REACHED AT THE END OF SESSION TO GET TO THE BUDGET DEAL IN TAKING OUT OF $491 MILLION ON JULY 1ST OF 2021 FISCAL YEAR 22; AS BUDGET DIRECTOR REITAN MENTIONED THERE WAS DESIGNED TO MAKE SURE WE HAD A BUDGETARY BALANCE IN 22-23 BUT THAT DID NOT CHANGE THE CURRENT LAW OF ALLIANCE WITH RESPECT TO THE BUDGET RESERVE SO GOING FORWARD AND THE YEAR AFTER THAT IN THE NOVEMBER FORECAST THERE IS A TARGET AND IT HASN’T BEEN REACHED AND THE TARGET AND THERE’S A CALL TO PUT MORE MONEY AND BECAUSE WE HAVE NOT REACHED HARD AND AS OF NOVEMBER BALLOTS ONCE AGAIN 33 PERCENT OF THE BALLOTS WOULD GO TOWARD THE RESERVE. THE CURRENT BUDGET RESERVE PROCESS IS IN PLACE HASN’T CHANGED IT WAS JUST A ONE TIME IT DIRECTION TO REMOVE $491 MILLION ON JULY 1ST OF 2021 TO BE USED AND MADE AVAILABLE AS ASSETS OR RESOURCES IN 21 FISCAL YEAR 22.>>WHAT’S THE STANDING OF THE $491 MILLION;?>>IT IS A FUTURE CHANGE RIGHT NOW TO RESERVE IS $2.3 BILLION AND IT WILL NOT CHANGE BUT ON JULY 1ST OF 2021 AND WILL DROP BY $491;000;000.399 $91 MILLION WILL BE AVAILABLE IN THE GENERAL FUND.>>THAN WITH THE FOLLOWING FORECAST THE NOVEMBER FORECAST AFTER JULY IF RESOURCES ARE THERE WHEN ASKED ABOUT CURRENT LAW THAN WITH THAT FOR 91 BE PAID BACK WERE PART OF IT PAID BACK AT THAT POINT? I’M CURIOUS HOW THE LAW APPLIES.>>MR. CHAIR IN NOVEMBER OF 2021 OF THOSE OF FOUR CAST BALLOTS A 33% ABOVE FORECAST BALANCE WILL GO INTO THE RESERVE IF THERE IS WOULD BE RUINED IF THE 491 CAME OUT AND IT WOULD BE 33% REPLACE THE 491 AND PUT IN 33 PERCENT OF WHATEVER THAT BALANCE WAS IN NOVEMBER OF 2021.>>AUTOMATICALLY APPLY THAT TOWARDS THE 491 IN THAT WOULD CONTINUE TO HAPPEN UNTIL BUT ULTIMATELY PAID BACK TO THE RESERVE TO MAKE THE RESERVE HOLDS?>>FORMULA WILL IGNORE THE 491 AND OPERATE GOING FORWARD AND SEE IF THERE’S ANY GAP THERE WE’RE NOT A TARGET WITH THE NOVEMBER BALLOT ALLOCATION WILL OPERATE EVERY YEAR THERE’S LESS OF A TARGET AMOUNT IN THE RESERVE REGARDLESS OF WHAT WE DO WITH THE 491.>>BEFORE GO TO OTHER QUESTIONS I HAVE A COMMENT I’VE ALWAYS BEEN INTERESTED IN HAVING A RESERVE. SOMETIMES I MAY SHARE MORE FREQUENTLY THAN I SHOULD SOME HISTORY WHEN I WAS HERE WHEN WE DIDN’T HAVE RESERVES WE HAD SIX SPECIAL SESSIONS. WE WERE CONTINUALLY TRYING TO BALANCE THE BUDGET AND THE GOVERNOR AT THE TIME WHEN HE LEFT OFFICE WAS ASKED BY ONE OF THE REPORTERS IF HE WOULD DO ANYTHING DIFFERENT THAN WHAT HE HAD DONE DURING HIS TERM OF OFFICE HE SAID YES I WOULD HAVE A RESERVE. THAT WAS THE GOVERNOR FROM THE OTHER SIDE OF THE AISLE SO I THINK WE CAN SAY IN A BIPARTISAN WAY THERE IS RECOGNITION OF THE IMPORTANCE OF A RESERVE. I AM PLEASED WE’RE REACHING THAT TARGET THAT’S MY EDITORIAL COMMENT FOR THE MORNING I GUESS WE’LL START WITH REPRESENTATIVE HERTAUS.>>THANK YOU MR. CHAIR I HAVE TWO QUESTIONS. LOOKING AT HOW THE GENERAL FUND BUDGET HAS GROWN OVER THE LAST 10 YEARS AN AMOUNT OF MONEY THAT WOULD OF BEEN REQUIRED TO MEET THE FULL FUNDED AT BUDGET RESERVE AMOUNT; THE GROWTH IN OUR STATE GENERAL FUND SPENDING AND REVENUES IS APPROACHING MERELY BY MY CALCULATIONS ALMOST AN ADDITIONAL BILLION DOLLARS THAT’S REQUIRED TO BE IN THE BUDGET RESERVE. IN MANY RESPECTS THAT COMPETES WITH LEGISLATIVE PRIORITIES WHENEVER THEY ARE. I NOTICE THAT THE PERCENTAGE REQUIRED HAS JUMPED FROM 4.3% UP TO 4.9% THAT’S SIX TENTHS OF A PERCENT IS A 13.9% INCREASE IN REQUIRED AMONG THE BUDGET RESERVE MAYBE YOU COULD TALK BLEYHL WHY THAT PERCENTAGE HAS INCREASED OUT OF INCREASED AND WHO AUTHORIZED THAT HOW THAT COMES OUT? MY SECOND QUESTION RELATES TO THE CONVERSATION WE HAD ABOUT POSITIVE NET MIGRATION IN MINNESOTA AND I DON’T DOUBT THAT IS TRUE. THE IRS DATA THAT I’VE CRUNCHED IS SUGGESTING MINNESOTA IS LOSING ABOUT A BILLION DOLLARS A YEAR OF TAXABLE GROSS INCOME AND NET MIGRATION OUT OF THE STATE. WOULDN’T IT BE WISER TO MEASURE THIS METRIC ABOUT GROSS TAXABLE INCOME AND THE GROWTH OF THAT AS OPPOSED TO NET MIGRATION IN OR OUT AS TO WHO THESE PEOPLE ARE OR WHAT THEIR INCOMES ARE? IT WOULD SEEM IT’S IMPORTANT TO UNDERSTAND THAT NUMBER BECAUSE SO MUCH OF OUR GENERAL FUND REVENUES REAPPLY DISPROPORTIONATELY FROM OTHER STATES ON THE INDIVIDUAL INCOME TAX.>>MR. CHAIR AND MEMBERS I WILL TAKE A SHOT AT THE FIRST QUESTION AND LET THE BUDGET THAT PROFESSOR KALAMBOKIDIS TAKE THE SECOND PART. ONE A I WOULD DISAGREE WITH THE FACT THAT THE RESERVE OPERATE TO NOT SUPPORT LEGISLATIVE PRIORITIES. ACTUALLY THAT’S EXACTLY WHAT IT’S DESIGNED TO DO WHEN THERE’S A DROP IN REVENUES AND IT PRECIPITOUSLY IF THE REVENUES DROP THE RESERVE FUND IS THERE TO KEEP THE FUNDING TO HIGHER EDUCATION TO THE EDUCATIONAL FACILITIES TO THE PROGRAM SETTER IN PLACE WITH THE BLOOD THIS LETTER PASSED SO IT’S DESIGNED AS A MEASURE TO ALLOW THOSE PROGRAMS THE LEGISLATURE VOTED WANT TO BE FUNDED UNTIL LEGISLATURE HAS TIME TO DO JUSTICE TO THE NEW ECONOMIC SITUATION AT THE TIME IS PRESENTED I THINK ACTUALLY THE RESERVE REALLY IS THE ULTIMATE IN AFFIRMING THE LEGISLATIVE PRIORITIES ABOUT WHY WE THINK IT’S THEIR. DR. KALAMBOKIDIS CONTENTS OF THE OTHER PARTS OF THE QUESTION.>>REP AND OTHER MEMBERS OF THE COMMITTEE; THE ONE BE I THINK IT’S ABOUT THE PERCENTAGE OF THE BUDGET RESERVE. BUT 4.3% LET ME GO BACK TO WHERE THAT IS ON THE SLIDE. THE BUDGET RESERVE BALANCE PRIOR TO THIS FORECAST WAS 4.3% OF GENERAL FUND REVENUE THAT’S NOT WHAT THE TARGET WAS THAT’S WHAT WAS IN THEIR. THE TARGETS MY OFFICE SETS THE TARGET AS A PERCENTAGE OF GENERAL FUND REVENUES BASED ON OUR ANALYSIS OF THE VOLATILITY OF THE REVENUE SYSTEM SO IN OUR SEPTEMBER REPORT WE ANALYZE THE VOLATILITIES OF REVENUE ESTIMATES AND SET THE TARGET OF 4.9% WE HAVE BEEN SUGGESTING THAT TARGET WITH OUR SEPTEMBER REPORTS SINCE THE LAW WAS PASSED ITS REQUIRED IS TO BUT THE STATE HAS NEVER MET THE TARGET UNTIL NOW. IF THAT ANSWERS YOUR QUESTION? THEN THE QUESTION ABOUT IN MIGRATION; SO THE DATA NOTE I REPORTED THE CENSUS OR AMERICAN CONSUMER SURVEY DATA FROM THE SENSES ABOUT POPULATION CHANGE SO IT DOESN’T INCLUDE INCOME CHANGE YOUR TALKING BUT WHICH COMES FROM THE IRS WHEN THOSE STATES THAT ARE UPDATED IT WILL BE INTERESTING TO SEE HOW THOSE CHANGES. THE POINT THE REASON I PUT THAT POPULATION CHANGE THE IMMIGRATION CHANGE INFORMATION IN THE SECTION ABOUT LABOR MARKETS IS BECAUSE IT’S HELPFUL FOR US TO SEE PEOPLE COMING TO THE STATE REGARDLESS OF WHAT THEIR INCOME IS BECAUSE WE NEED THE WORKERS ACROSS FROM THE CITY’S OUT TO GREATER MINNESOTA SO THAT’S WHY I THOUGHT THAT WOULD EMIT A BRIGHT SPOT FOR MINNESOTA AND THROUGHOUT THIS TIME EVEN AS DURING THAT TIME WHEN ARNETT IN MIGRATION WAS NEGATIVE BUT DEFINITELY INTO THIS TIME WHERE OUR NET IMMIGRATION IS POSITIVE OUR INCOME TAX RECEIPTS HAVE GROWN. REGARDLESS OF WHETHER THE NEW PEOPLE COMING IN THE OR ITS PEOPLE WHO HAVE BEEN HERE AND THERE INCOMES GROW THE RECEIPTS HAVE GROWN DURING THAT TIME.>>REP HERTAUS.>>THANK YOU I APPRECIATE THE EXPLANATION ON THE PERCENTAGES. I’M NOT REALLY OUR REBUTTAL BUT I AGREE WITH YOU COMMISSIONER FRANS AS TO WHAT YOU SAID ABOUT THAT ALLOWS US TO ESTABLISH THOSE PRIORITIES YES IT DOES; BUT NOT ALL LEGISLATIVE PRIORITIES WITH REGARD TO PARTISAN PRIORITIES ARE ENABLED TO BE ENACTED OFTENTIMES BECAUSE OF THE GROWING BUDGET RESERVE. I GUESS I WOULD SAY THERE ARE THINGS THAT ARE STATUTORILY PART OF OUR CONSTITUTIONAL REQUIRED FOR US TO DO SUCH AS TRANSPORTATION AND EDUCATION THINGS LIKE THAT BUT THERE MAY BE SOME OTHER AREAS THAT SOME OF US WOULD LIKE TO SEE SOME PROGRESS WITH REGARD TO TAXES AND OBVIOUSLY WHEN THERE’S A SHORTAGE OF MONEY TAX REFORMS ARE USUALLY OFF THE TABLE THANK YOU.>>REPRESENTATIVE MARIANI.>>THANK YOU MR. CHAIR AND DR. KALAMBOKIDIS; I GREW UP I ACTUALLY SPOKE GREEK WHEN I GROW UP I GREW UP WITH A LARGE GREEK COMMUNITY. I FEEL AT HOME HERE. I HAVE SEVERAL HOPEFULLY CORRECT MACRO LEVEL QUESTIONS. BECAUSE I WANT TO GET AN AIRING AND A FEEL FOR HOW OUR STATE IS EVOLVING AND PERHAPS WHAT MAKES OUR STATE UNIQUE PARTICULARLY RELATIVE TO THE MEMBERS BEFORE US. IN NO PARTICULAR ORDER YOU TALK ABOUT THE UNCERTAINTY ELEMENTS HAVING TO DO WITH SOME OF THAT IS SPECULATIVE BECAUSE IT’S A MOVING THING AND LATELY IT SEEMS TO BE MOVING QUITE A BIT. I WONDER IF YOU HAVE ANY INFORMATION TO SHARE ABOUT WHAT ARE MINNESOTA’S CARROTS THE SENSITIVE IMPACT ON AREAS WHAT ARE OUR BIGGEST SECTORS THAT ARE SUBJECT TO THAT KIND OF UNCERTAINTY IN OUR STATE?>>REP AND MR. CHAIR AND MEMBERS; THERE ARE TWO DIFFERENT IMPACTS OF TARIFFS AND CURRENT STATE POLICY ON INDUSTRIES BETTER TRADE AFFECTED OR TRADE IMPACTED. IS THE DIRECTOR OF SOME MUCH MORE MONEY ARE YOU PAYING FOR PEER MANUFACTURER PAYING FOR THE INTERMEDIATE GOODS COMING IN FROM OTHER COUNTRIES AND THEN HOW MUCH THAT CAN YOU PASS FORWARD TO YOUR CUSTOMERS THERE’S ALSO THE EFFECT OF RETALIATORY TARIFFS FROM OUR TRADING PARTNERS AND HOW MUCH OF THAT IS REDUCING DEMAND FOR THE GOOD WE’RE TRYING TO EXPORT OUT OF MINNESOTA. THAT’S THE DIRECT IMPACT AND THEN THERE’S ALSO THE IMPACT OF TRADE POLICY UNCERTAINTY SIMPLY NOT KNOWING AT ANY GIVEN POINT WHAT POLICY IS GOING TO BE IMAGINE BEING SOMEONE IN A TRADE AFFECTED INDUSTRY IN MADRID AFFECTED INDUSTRIES WOULD BE AGRICULTURAL; MANUFACTURING; LOGISTICS AND TRANSPORTATION AND THINKING YOU HAVE YOUR SUPPLY CHAIN FIGURED OUT OR HAVE YOUR CUSTOMER FIGURED OUT YOU DEVELOP A CUSTOMER BASE IN ANOTHER COUNTRY AND NOW YOU’RE NOT SURE IF THAT’S COIN TO CARRY FORWARD FOR THE NEXT YEAR OR WHAT’S GOING TO HAPPEN? THOSE TWO IMPACTS IHS THE CONSULTING FIRM USE IS EMPHASIZING THAT UNCERTAINTY AS BEING LARGER BECAUSE IT REQUIRES FIRMS TO ENSURE AGAINST RISK THAT THE MARKET MAY NOT BE AIRPORT TOLD BACK ON POSSIBLE VENTURES BECAUSE THEY DON’T KNOW WHAT TRADE POLICIES WILL BE. WHAT INDUSTRIES ARE AFFECTED IN MINNESOTA ON AGRICULTURE IS FOR SURE HAS BEEN IMPACTED IN IMPORTANT WAYS WITH REGARD TO RETALIATORY TARIFFS ON BY OUR TRADING PARTNERS ON EXPORTS OUT OF THE UNITED STATES. MANUFACTURING HAS AS WELL AND SPECIFICALLY ANY MANUFACTURING BAT AND MANUFACTURERS THAT IMPORT INTERMEDIATE GOODS IN NEEDED GOODS IS SOMETHING YOU USED TO PRODUCE A FINAL GOOD THEY’RE IMPORTING INTERMEDIATE GOODS FROM COUNTRIES WHERE THE U.S. HAS LEVIED TARIFFS AND AIRPLANE THAT COST COMING IN AND THEN IF THE MAY ALSO BE SHIPPING OUT TO COUNTRIES THAT IMPOSE TARIFFS ON US SO SOME MANUFACTURERS ARE GETTING HIT ON BOTH SIDES THERE.>>MR. CHAIR IT DOES OCCUR TO ME I SUSPECT TO EVERYONE HERE AT THE TABLE THAT THE VOLATILE TRADE POSTURE ON THE PART OF THE FEDERAL GOVERNMENT IS NOT OUR FRIEND IN THE STATE OF MINNESOTA. DR. KALAMBOKIDIS YOU MENTIONED QUICKLY IN THE SLOW- GROWTH EXPANSION ENVIRONMENT THERE SEVERAL FACTORS YOU TALKED ABOUT IT’S INTERESTING BECAUSE I GUESS MOST OF US SAY THERE’S GOOD THINGS HAPPENING BUT THE THING IS THEY COULD BE BETTER BUT IT’S KIND OF AN UNUSUAL ENVIRONMENT PERHAPS. ONE OF THE FACTORS HAS TO DO WITH CONSUMER SPENDING. CAN YOU TELL US WHETHER OR NOT MINNESOTANS ARE DIFFERENT IN TERMS OF CONSUMER SPENDING AND WHAT IS IT THAT MINNESOTANS ARE SPENDING ON THE THAT’S PARTICULARLY HELPFUL FOR THE NUMBERS BEFORE ROSS?>>MR. CHAIR END REPRESENTATIVE AND MEMBERS SPECIFIC; WAIT OUT OF MINNESOTA’S CONSUMER SPENDING MAY DIFFER FROM THE U.S.? WHAT WE DO WHEN WE FORM OUR SALES TAX FORECAST IS WE LOOK AT SPENDING ON THOSE ITEMS BETTER INCLUDED IN MINNESOTA SALES-TAX. WE LOOK AT WE DON’T HAVE MINNESOTA SPECIFIC DATA ON THE SPENDING ITEMS WE LOOK AT THE U.S. SPENDING FORECAST ON DOZENS OF FUNDING ITEMS THEN WE CONSTRUCT A SIMULATION OF BRAZIL’S TAX BASED ON THAT I DON’T HAVE SPECIFIC INFORMATION ON MINNESOTA SPECIFIC INTERMISSION AND DIFFERENT KINDS OF SPENDING.>>MR. CHAIR PERHAPS COMMISSIONER FRANS CAN HELP ME LATER IN TERMS OF PERHAPS CONNECTING WITH WHO AND STATE GOVERNMENT I CAN PURSUE THAT SPECIFIC INFORMATION? MR. CHARREN SEVERAL QUESTIONS I KNOW OTHERS DO AS WELL I’LL ASK THIS LAST ONE IT SEEMS TO ME PARTICULARLY WHEN IT COMES TO INDIVIDUAL AND SALES TAXES AND THOSE OF BABY BOOMER RETIRING IN VARMINT THE QUICKER OUR STATE CAN FIND REPLACEMENTS AND THE HELP MOVE EMPOWER AND WHAT WITH WHATEVER THE METAPHOR IS TO ASSESS THAT REPLACING COMMUNITY TO CONTRIBUTE TO INDIVIDUAL SALES TAX CAN YOU TELL US QUICKLY WHO ARE THESE NEW ENTRANCE TO THE WORKFORCE? I HEARD IT’S NOT MIGRATION FROM OTHER STATES OTHER INTERNATIONAL IMMIGRATION CONTRIBUTORS AS WELL ARE THE YOUNGER FOLKS? ARE THERE RACIAL OR CULTURAL DISTINCTIONS BETWEEN THAT AND PERHAPS THE RECENT HISTORICAL GROWTH TO GET A FEEL FOR WHO WE’RE TALKING ABOUT HERE BECAUSE I THINK MR. CHAIR AS WE CONTINUE DESIGN OUR LEGISLATURES BEEN DOING A GOOD JOB OF THAT FOR THE PAST FEW YEARS OF BEING ABLE TO ASSESS AND WALK WITH THOSE FOLKS THE MORE WE KNOW ABOUT WHO THEY ARE THE BETTER WE WILL BE ABLE. TO DO ABLE .>>MR. CHAIR END REPRESENTATIVE THAT’S A GREAT QUESTION I AGREE THERE’S A ROLE TO BE PLAYED WITH TRYING TO EASE THE TRANSITION AND THE SOONER WE GET PEOPLE INTO THE WORKFORCE A BETTER. THERE’S A ROLE FOR EMPLOYEES TO PLAY AS WELL SO EMPLOYERS WERE GOING TO THRIVE AS A GARMENT OF ONE TO FIGURE OUT HOW TO ATTRACT THE NEW ENTRANTS AND HOW TO TRAIN THEM AND HOW TO RETAIN THEM AND HOW TO BE FLEXIBLE WITH THE WORKERS THEY DO HAVE AS WELL TO HAVE MORE FLEXIBLE WORK HOURS; RAISE WAGES WHATEVER IT TAKES TO KEEP PEOPLE IN THE MARKET. I DON’T HAVE DATA ON THE SPECIFIC NEW ENTRANTS WE TALKED ABOUT IN 17 AND 18 OF THE DOMESTIC AND MIGRATION BUT HISTORICALLY OVER TIME AS MINNESOTA’S POPULATION HAS AGED AND AS THE BABY BOOM GENERATION HAS MOVED INTO RETIREMENT AGE AT THE SAME TIME OUR POPULATION HAS BECOME MORE DIVERSE. POPULATIONS POPULATION GROWTH AND INTERNATIONAL AMONG NEW IMMIGRANT COMMUNITIES AND IN MIGRATION FROM OTHER COUNTRIES HAS BEEN AN IMPORTANT FACTOR IN KEEPING OUR LABOUR SUPPLY GOING KEEPING OUR LABOUR SUPPLY ROBUST ONE OTHER REASON WHY THE NET DOMESTIC IMMIGRATION CAME AT SUCH A GOOD TIME IS BECAUSE IN THOSE YEARS INTERNATIONAL IN MIGRATION FELL. DURING THE YEARS WE OF NEGATIVE DOMESTIC MIGRATION WE STILL THE POSITIVE POLE IN MIGRATION BECAUSE WE HAD INTERNATIONAL MIGRANTS WERE MAKING UP THE DIFFERENCE. INTERNATIONAL MIGRATION TO UNITED STATES HAS FALLEN IN RECENT YEARS IT’S NOT A MINNESOTA PHENOMENON IT’S A NATIONAL PHENOMENON AND WE HAVE SEEN THE CONTRIBUTION TO OUR POPULATION GROWTH FROM INTERNATIONAL NEWCOMERS GO DOWN IN THE LAST COUPLE OF YEARS BUT WE HAD THESE NEW PEOPLE FROM OTHER STATES; AND TO MAKE THE DIFFERENCE.>>THANK YOU.>>REPRESENTATIVE NELSON.>>THANK YOU MR. CHAIR I GUESS THE QUESTION I HAVE BEEN LOOKING AT THIS THIS CAME UP LAST YEAR AT THE END OF SESSION AND EVERYONE WAS EYEING THIS MONEY THE STADIUM RESERVE ACCOUNT. IS THIS AN ACTUAL A SEPARATE ACCOUNT THAT THERE’S MONEY IN THEIR GROWING THAT’S NOT BEEN SPENT OR IS THIS PART OF THE GENERAL FUND BUDGET THAT’S A BEAR AND I GUESS THE OTHER QUESTION IS A LOT PEOPLE WANT TO SEE THAT AND THEY’RE TRYING THAT AS A WAY TO TAKE THAT MONEY AND SPEND IT ON OTHER THINGS. WHAT IS THE EARLIEST WE CAN START PAYING OFF THE CURRENT BONDS ON THE STATED EARLIER HENNEPIN COUNTY TO GET THAT OFF THE BACK OF THE STATE?>>MR. CHAIR 2023 TO GO TO THE LAST QUESTION THAT’S WHEN WE CAN BEGIN TO START PAYING OFF SOME LOANS AS YOU KNOW WE STARTED THEN I THINK IN 2013 OR 14 AND I THINK IT’S 2014 TO SEVEN YEARS IS THE FIRST SO 2023 IS THE FIRST AND THAT WILL BE PART OF THOSE THEN WEAKENED PAYOFF THAT CERTAINLY WOULD BE OBVIOUSLY SOME SAVINGS TO PAYING THE INTEREST SAVINGS AND PAYING OFF OLD LOANS AND THAT’S ONE ASPECT OF THE BUDGET RESERVE. THE STADIUM BUDGET RESERVE IS ACCOUNTED FOR SEPARATELY THAT MONEY CANNOT BE SPENT WITHOUT SPECIFIC LEGISLATION AUTHORIZATION OF THE MONEY IN THE U.S. BANK STADIUM RESERVE IS SPECIFICALLY SET ASIDE AND ACCOUNTED FOR SEPARATELY REQUIRING ANY CHANGE. AS THE MONEY GROWS AND WHERE IS THAT CHART? IN 2021 YOU CAN SEE WE WILL HAVE $124 MILLION IN THE ACCOUNT AT THE END OF 2021 INITIALLY GOING BACK IN TIME A LITTLE SOME OF YOUR HAIR WHEN WE PASS THE STADIUM LEGISLATION IN 2012 AND 2013 WE AMENDED THE STATUTE TO MAKE UP BECAUSE THE REVENUES WERE COMING IN AS FAST AS REAL AND ANOTHER COMING IN AND MORE THAN WE ANTICIPATED SO THAT’S WHY THE BALANCE IS GROWING SO RAPIDLY NOW. ONE OF THE THINGS WE ALWAYS WANTED TO IS WE WANT TO MAKE SURE WE AT LEAST ONE YEAR’S WORTH OF DEBT SERVICE AND OTHER OBLIGATIONS IN THE RESERVE ACCOUNT AT A MINIMUM AND THAT’S ABOUT $40 MILLION YEAR WHEN YOU INCLUDE THE DEBT SERVICE PLUS THE OTHER ALLOCATIONS THAT ARE MADE OUT OF THE U.S. BANK STADIUM ACCORDING TO LAW THAT’S ABOUT $40 MILLION HERE THAT WAS WHAT WE HAVE MMB TALKED ABOUT AND I’M MINIMUM THAT WE THOUGHT SHOULD HAVE BEEN THERE BUT IT GOES BEYOND THAT AMOUNT THAT IT BECOMES AN ISSUE I THINK FOR THE POLICY MAKERS LIKE YOU TO DECIDE WHAT IS THE APPROPRIATE USE? YOU LEAVE THE MONEY THERE AND LET IT CONTINUE TO GROW AND USE IT IN 2023 TO BEGIN MAKING THE REPAYMENT OR USE IT FOR OTHER NEEDS? ONE OF THE REASONS IS GROWING IN ADDITION TO THE REVENUES THAT ARE COMING IN FASTER THAN WE ANTICIPATED AND 2021 THE CITY MINNEAPOLIS BEGINS MAKING THEIR SHARE OF PAYMENTS SO VOTE AND 2021 THERE WILL BE SOME ADJUSTMENT NEEDED BECAUSE WITH THE ADDITION OF MINNEAPOLIS PAYING THEIR SHARE THEY COULDN’T DO IT INITIALLY IN 2012 BECAUSE THE DEBT SERVICE OBLIGATIONS THAT HAD ON THE TARGET CENTER IN MINNEAPOLIS. THERE’S ALWAYS BEEN THIS AWARENESS THERE’S GOING TO BE SOME POINT WHERE THERE’S GOING TO BE MONEY IN THIS RESERVE ACCOUNT THAT GOES BEYOND THE NEEDS OF THE ORIGINAL INTENT OF THE LEGISLATION SO I THINK YOU HIT ON AN ISSUE THERE THAT HAS TO BE THAT YOU NEED TO DECIDE AND TALK ABOUT ALL I CAN SAY THIS A LOT OF US HAVE BEEN WATCHING A THINK ALL OF THE $1.3 BILLION INCLUDING THIS MONEY WILL BE SPENT ON TWITTER ANOTHER COUNCIL THE LAST SEVERAL DAYS MANY TIMES OVER …LAUGHTER… YOU RAISE THEIR REALLY LEGITIMATE POINT WE’VE GONE BEYOND A BASIC NEED OF HAVING RESERVED FOR THE DEBT SERVICE AND NOW WE’RE HAVING MORE MONEY IN THERE AND WE HAVE TO DECIDE LONG TERM WHAT WE DO WITH THAT?>>THANK YOU MR. CHAIR THE OTHER QUESTION I HAD I THINK YOU KIND OF HIT ON THIS; THE CARRY OVER BALANCE LOOKING OUT YEARS 22 AND 23 THE CARRY FORWARD BALANCE WOULD BE 587 TO TAKE A 419 AWAY FROM THAT THE BUDGET RESERVE IS GOING DOWN WERE TALKING ABOUT $96 MILLION AND I DON’T THINK THAT’S A LARGE IT’S A LOT OF MONEY FOR EVERYONE WAS AT THE TABLE HERE BUT I DON’T IT’S A LARGE AMOUNT CONSIDERING OUR BUDGET AND IT WOULDN’T TAKE MUCH WITH MY MIND IT WOULDN’T TAKE MUCH OF A GROUP IN THE ECONOMY TO GO AWAY AND GO THE OTHER DIRECTION.>>MR. CHAIR AND REPRESENTATIVE THAT’S AN EXCELLENT POINT AND THAT IS THE NATURE OF SOME OF THE ONE TIME MONEY IF YOU WILL THAT WE HAVE WITH 20 AND 21. WHEN YOU LOOK AT THE STRUCTURAL BALANCE THE BUDGET DIRECTOR REITAN MENTION THIS TO A $21 MILLION OF ONGOING REVENUE INCREASE THE REVENUES WERE OUTPACING EXPENDITURES BY $222 MILLION IN 22 AND 23 IF YOU LOOK THAT IS THE ONGOING BALANCE ITS ABOUT $1.1 BILLION OF THE $1.3 BILLION YOU COULD LOOK IT AS ONE TIME MONEY BECAUSE WE DON’T SEE THAT ONGOING. AS WE ALL KNOW WHEN YOU SPEND MONEY IN ONE BIENNIUM WITH ONGOING PROJECT TO PUT MORE EXPENSIVE AND YOU HAVE TO DOUBLE IT AND THE NEXT BIENNIUM OR MORE. CLEARLY ANY SERIOUS SPENDING FOR ONGOING PROGRAMMING IS GOING REPRESENTATIVE TO BE WE’RE GOING TO THINK ABOUT WHAT THERE WILL DO FOR A LONG-TERM BUDGET STABILITY IN THIS WHOLE CONCEPT OF HOW MUCH WILL HAPPEN THE WAY RESOURCES AND 22 AND 23 IS SOMETHING WITH THAT ISSUE FOR SEVERAL FORECAST YEARS IN A ROW NOW WHERE THE RESOURCES IN OUT YEARS THE OUT BIENNIUM IS LESS THAN THE CURRENT RESOURCES IN THIS BIENNIUM OR THE CURRENT BIENNIUM. IT PROVIDES CHALLENGES AND I THINK WITH THIS SORT OF BE VERY CAREFUL WHAT WE SPEND THIS YEAR AND LOOKING TOWARDS THE LONG TERM ESPECIALLY IF THE $491 MILLION IS ADDED TO THE BUDGET RESERVE.>>I MIGHT INTERJECT WITH REPRESENTATIVE NELSON YOUR FIRST QUESTION; TENTATIVELY WE ARE GOING HAVE OUR FIRST WAYS AND MEANS MEETING ON THE 17TH OF FEBRUARY AND ONE OF THE ISSUES I HAVE TENTATIVELY HAVE ON THE LIST OF THE STADIUM RESERVE. WE WILL HAVE A FURTHER DISCUSSION ABOUT THAT THERE WAS A GOOD QUESTION NOW BUT SO YOU ARE AWARE YOUR INTEREST IN THAT ISSUE WE’RE GOING TO AS THE COMMISSIONER INDICATED SHOULD HAVE A DISCUSSION ABOUT WHAT’S NEEDED THERE AND HOW THAT IS HANDLED IN THE FUTURE. HAVE ABOUT NINE PEOPLE ON THE LIST WE DON’T HAVE A FLOOR SESSION TODAY …LAUGHTER… I WANT YOU TO NOTE WE HAVE A LIST HERE IS WE’RE GOING TO TAKE PEOPLE IN THE ORDER THE HANDS WITHOUT A. REPRESENTATIVE DRAZKOWSKI.>>THANK YOU MR. CHAIR. MR. CHAIR AND MEMBERS THE APPARENT GIDDINESS AND ZEAL OF SOME OF THE MEMBERS IN THE ADMINISTRATION AROUND THE TABLE HERE TO SPEND THE PEOPLE’S MONEY IS PALPABLE AT THE SAME TIME I THINK IT’S IMPORTANT TO NOTE THAN LOOK WE HAVE OF ANNUAL BUDGET NOW THAT’S THE LARGEST IN THE HISTORY OF THE STATE AT $48.5 BILLION ROUGHLY. ADDITIONALLY IT’S APPARENT POLICY AND DECISIONS HAVE SOCKED WITH A LOT WAIT ANOTHER $2.5 BILLION OF THE PEOPLE’S MONEY FOR FUTURE SPENDING YET TO BE DECIDED JUST ANTICIPATING TO SPEND IT THAT FUTURES ZEAL AND GETTING THE STATE MIGHT SOMEHOW PRESENT ITSELF THEN. ADDITIONALLY MEMBERS IF WE LOOK AT THE SPENDING SIDE OF THE EQUATION PRESENTED HERE IN THE REPORT; IT’S APPARENT THE LAST LEGISLATIVE PROCESS RENDERED DECISIONMAKING ON BUDGETS THAT OVERESTIMATED THE AMOUNT OF MONEY THE GOVERNMENT WOULD NEED. THE C AND E-12 EDUCATION WE ACTUALLY BUDGETED AT $24 MILLION TO MUCH ALMOST $100 MILLION TO MUCH OF HEALTH AND HUMAN SERVICES AND DEBT SERVICE WE BUDGETED $51 MILLION TO MUCH NETTING ACTUALLY AND OVER ESTIMATE IN THE AMOUNT OF MONEY WE NEEDED THAT IS ACTUALLY BUDGETED. I WOULD HOPE MR. CHARREN MEMBERS AND A QUESTION FOR COMMISSIONER FRANS IS WILL THE GOVERNMENT BECOMING BACK NEXT SESSION FOR A BUDGET RECONCILIATION PROPOSAL THAT WILL DECREASE THE BUDGET TO MATCH THE ACTUAL NEED ESPECIALLY AS I LOOK AT H H S AND E- 12 AND DEBT SERVICE WILL WE ACTUALLY HAVE A PROPOSAL FROM THE ADMINISTRATION TO SPEND LAST IN THE BUDGET BECAUSE AS WE CAN SEE WHAT WE OVERESTIMATED THE AMOUNT OF NEED TO HEAR IN THE BUDGET PROCESS THAT ENDED DURING A REGULAR SESSION.>>MR. CHAIR END REPRESENTATIVE WHAT I’M GIDDY ABOUT I’M GIDDY ABOUT THE PEOPLE NOW HAVE A 3.5 COURT $2.4 BILLION IN RESERVE THAT WILL PROTECT PROGRAMMING THAT YOU VOTED THEY SHOULD HAVE OF. WHEN YOU LOOK AT THE EDUCATION CUTS WE MAKE A RECESSION WHEN YOU LOOK AT THE HIGHER EDUCATION AND K-12 BORROWING WE DO WHEN YOU CUT SERVICES WE CUT THIS IS DESIGNED EXACTLY FOR THE PEOPLE TO BE PROTECTED IN THE EVENT OF AN ECONOMIC DOWNTURN THIS IS THE PEOPLE’S RESERVE IF THERE EVER WAS ONE THIS IS AT. I’M GIDDY ABOUT THAT BECAUSE I THINK THAT’S WHAT WHEN YOU BUY INSURANCE OR IS SET ASIDE MONEY FOR A RAINY DAY RAINS IT’S NICE TO HAVE IT THERE AND THEREFORE PURPOSE NOT TO RUN GOVERNMENT IT’S THERE FOR THE PEOPLE TO GET THE SERVICES YOU VOTED THEY SHOULD HAVE. THAT’S WHAT I’M GETTING ABOUT IN TERMS OF MATCHING REVENUES TO EXPENDITURES; THIS BUDGET EVERY BUDGET IS DIFFICULT EVERYONE IS HARD TO GET RIGHT ON THE MONEY AND CLEARLY WHAT WE TRY TO DO IS PICK THE BEST POSSIBLE ESTIMATE RECANT AND THINGS CHANGE. I THINK IT WAS JOHN MAYNARD KEYNES WHO SAID WHEN THE FACTS CHANGE MY MIND CHANGES WHAT DO YOU DO SERVE? THAT’S WHAT I DO I LOOK OF THE NEW DATA THE NEW INFORMATION I DECIDE IN WILL SIT AROUND AND SAY LET’S THIS HAPPENED WHAT’S DIFFERENT? NEVER GOING TO GET IT EXACTLY ON THE BUT WE DO TAKE SERIOUSLY WHEN WE’RE WRONG WHY WERE WE WRONG WHAT PEOPLE NOT IN ROLE AS FAST AS WE THOUGHT THERE WOULDN’T? SOMETIMES OF A GROWING ECONOMY LIKE WE HAVE YOUR INCOME LEVELS FOR CERTAIN PEOPLE BETTER GOING UP AND THEY SORT OF PHASEOUT OF SOME THE PROGRAM WE HAVE IN HUMAN SERVICES SO THERE’S A WIDE RANGE OF ISSUES THAT WE HAVE AND WHAT I CAN GUARANTEE AS GOVERNOR WALZ WILL HOLD OUR FEET TO THE FIRE HE WILL SAY AS WE START WORKING IN A BIENNIAL BUDGET EARLY IN THE NEXT YEAR FOR THE NEXT BIENNIUM AFTER THIS WHAT WE NEED AND WHAT WE REALLY NEED WHAT IS A COST AND HOW CAN WE START EVALUATING MORE EFFECTIVELY WHAT IT IS WE’RE DOING? ONE OF THE THINGS WE AGREED ON THIS LAST SESSION WAS TO INCREASE OUR RESULTS MANAGEMENT OR USE RESULTS ON EVIDENCE BASED DATA TO EVALUATE PROGRAM IN. I TAKE THAT CHANCE SERIOUSLY REPRESENTATIVE THAT WE SHOULD DO MORE TO MAKE SURE WE’RE DOING IS WORKING ITS EFFECTIVE COST-EFFECTIVE AND WE HAVE THE RIGHT AMOUNT OF MONEY. TAKE THAT VERY SERIOUSLY AND APPRECIATE YOUR CONCERN ALONG THOSE LINES.>>REPRESENTATIVE DRAZKOWSKI.>>Q. MR. CHARREN THINK MR. FRENTZ I DIDN’T HEAR YES BUT MAYBE SOMETHING AROUND THE EDGE OF THAT. I’M HOPING THE ADMINISTRATION DOES COME BACK AND HELP US RIGHT SIZES BUT OBVIOUSLY IT’S TOO BIG WE FORMED A BUDGET THAT WAS LARGER THAN THE NEED WAS IT’S VERY APPARENT IN BLACK AND WHITE HERE AND HOPEFULLY WILL LEAD THE BUDGET RECONCILIATION PROCESS THAT WILL TURN SOME OF THE MONEY BACK LOSE TO THE PEOPLE WHO TRULY BELONGS TO AND THAT’S THE HARD WORKING PEOPLE OF MINNESOTA THEIR WORK OUT EVERY DAY TO GENERATE THIS. THE SPECIFIC QUESTION COMMISSIONER COMMITTEE BUDGET DIRECTOR REITAN COULD HELP OUT AS WELL IN THE HHS AREA WE OVER BUDGETED BY ABOUT ALMOST $100 MILLION IF YOU COULD REVIEW FOR US AGAIN AND BUDGET DIRECTOR WHERE THAT MONEY CAME FROM AND WAS THERE ANY MONEY THAT ISN’T GOING TO BE SPENT BETWEEN NOW AND THE END OF THE BIENNIUM IN THE HHS AREA THAT’S DUE TO THE ADMINISTRATION GOING AFTER AND ROOTING OUT FRAUD WASTE AND CORRUPTION IN THE DHS THE MULTITUDE OF DHS PROGRAMS THAT’S REALLY PLAY THAT AGENCY? I’M CURIOUS IF ANY NUMBERS ARE REFLECTED IN THEIR IT THAT STARTS TO REALLY ADDRESS THAT ISSUE THOSE MANY ISSUES?>>MR. CHAIR END REPRESENTATIVE WHAT I WOULD LIKE TO START WITH ON THE HEALTH AND HUMAN SERVICES CHANGE IS THAT THE 0.7% CHANGE FROM END OF SESSION ESTIMATES. ON A PERCENTAGE BASIS IS RELATIVELY SMALL IN TERMS OF THE MAGNITUDE OF CHANGE AND HEALTH AND HUMAN SERVICES IN PARTICULAR IT MORE DIFFICULT BILL AREA AND TO FORECAST BECAUSE UNLIKE THE-12 EDUCATION WHERE WE HAVE A FAIRLY GOOD UNDERSTANDING OF HOW MANY STUDENTS ARE IN OUR PUBLIC SCHOOLS AND TO THEIR PREDICTABLE PROGRESSION RATIO FROM ONE GRADE TO THE NEXT AND HEALTH AND HUMAN SERVICES ALATAS DRIVEN BY ECONOMIC CONDITIONS AND TERMS OF WHO ENROLLS IN PROGRAMMING. THE BIGGEST CONTRIBUTOR TO THE CHANGE IN THIS FORECAST IS FEWER PEOPLE ENROLLING IN AND A BASIC CARE AND THAT FOR THE MOST PART IS DUE TO IMPROVED ECONOMIC CONDITIONS. I JUST WANT TO HIGHLIGHT SOME OF THOSE CHANGES IN FORECASTS ARGUE TO CONDITIONS IN THE ECONOMY AND CONDITIONS OUTSIDE THE CONTROL OF THE DEPARTMENT OF HUMAN SERVICES MORE ABOUT THE NUMBER OF PEOPLE USING PUBLIC PROGRAMS. TO SPEAK TO YOUR SPECIFIC QUESTION ABOUT FRAUD I WOULD HAVE TO DEFER TO THE DEPARTMENT OF HUMAN SERVICES THE FORECAST REFLECTS THE BEST ESTIMATES FOR CURRENT USE OF EXISTING PROGRAMS.>>MR. CHAIR AT THANK YOU BUDGET DIRECTOR BERT; A DIRECTOR ARE YOU AWARE OF ANY OF THE $97 MILLION THAT’S ATTRIBUTED TO ACTUALLY RECAPTURING SOME OF A WASTE FRAUD AND ABUSE THE HUNDREDS OF MILLIONS OF DOLLARS IN WASTE FRAUD AND ABUSE AT DHS?>>MR. CHAIR END REPRESENTATIVE THIS FORECAST DOES INCORPORATE SOME OF THE ISSUES THAT HAVE BEEN IN THE NEWS RECENTLY IN TERMS OF PAYMENT ERRORS AND HOWELL THOSE WILL BE CORRECTED GOING FORWARD. ONE OF A MORE SIGNIFY ONE’S THAT WAS IN THE NEWS WAS THE TRIBAL GAMING ISSUES THAT NETS TO ZERO THE FORECAST ASSUMES REPAYMENT TO THE FEDERAL GOVERNMENT BY AND ALSO ASSUMES BASED ON CURRENT LAW A COLLECTION BACK FROM THE TRIBES.>>MR. CHAIR BUDGET DIRECTOR REITAN OF THE $97 MILLION HOW MUCH OF THAT AND A DOLLAR AMOUNT IS ATTRIBUTED TO RECAPTURING FROM SOME OF A WASTE FRAUD AND ABUSE THAT THE HUGE DEPARTMENT OF HUMAN SERVICES INTERSTATE HEALTH AND HUMAN SERVICES HAS HAD A?>>MR. CHAIR AND REPRESENTATIVE I THINK WICCAN FOLLOW-UP ON THAT AND INCLUDE THE DEPARTMENT OF HUMAN SERVICES AND THE ANSWER I’M NOT SURE ON TRACKING ALL THAT YOUR INCLUDING IN THAT NUMBER. DISCUSSING IT WITH THE DEPARTMENT OF HUMAN SERVICES OFFLINE TO HELP GIVE YOU AN ANSWER WOULD BE BEST.>>THANK YOU MR. CHAIR THINK BUDGET DIRECTOR I CAN’T LIKE YOU THE WAY FROM ABUSE IS SO WIDESPREAD I TO HAVE A HARD TIME REMEMBERING ALL THAT BANK.>>REP LILLIE .>>THANK YOU MR. CHAIR I APPRECIATE THE CHAIRS; EARLY ON ABOUT THE RESERVES. YOU FIRST STARTED TO TALK AFTER THE PRESENTATION I’VE BEEN HERE AS LONG AS YOU BUT I’VE BEEN THROUGH A REMEMBER WHEN REPRESENTATIVE HAMILTON AND I CAME IN AND WE’VE GONE THROUGH SOME TOUGH BUDGET YEARS WE DIDN’T HAVE THAT RESERVE AND IT’S NOT FUN FOR ANYBODY AND YOU’RE CUTTING STUFF THAT IS REALLY IMPORTANT TO PEOPLE AND YOU’RE HURTING PEOPLE AND THAT’S OUR REAL THING THAT REALLY HAPPENS. I VALUE ON A LOT OF THE GETTY IS THE WORD I WOULD USE I’M PRETTY I THINK WE ALL SHOULD BE PROUD WE HAVE A RESERVE I THINK IT’S THE RIGHT THING FOR MINNESOTANS AND I THINK WE CAN LOOK AT THEM IN THE FACE AND SAY I DON’T KNOW WHAT IS TOO MUCH BUT I THINK OF OUR OWN SITUATION AS A FAMILY IF YOU DON’T HAVE A LITTLE BIT OF A RESERVE YOU GET IN TROUBLE FAST IT COULD BE A FURNACE FOR TRANSMISSION IN YOUR CAR; YOU JUST DON’T KNOW BUT ANYWAY I’M HAPPY WE HAVE THAT I THINK SHOULD ALL BE REALLY PROUD OF THAT AND LEADING THAT LEGACY FOR MINNESOTA AND. MY REAL QUESTION IS; I’M LUCKY ENOUGH TO BE ON THE BONDING COMMITTEE I’VE BEEN IN MANY YOUR DISTRICTS I’VE BEEN DOWN TO FINAL COMMISSIONER FRANS AND YOUR TEAM YOU BEEN OVER THE STATE AS WELL WE HAD 18 DAYS OF STOPS AT ABOUT $5 BILLION OF REQUESTS; TO LONDON 30 PRESENTATIONS SO WE’VE SEEN A FEW WE HAVE BEEN TO REPRESENTATIVE HAMILTON AND REPRESENTATIVE SCHOMACKER TO SAY WASTE WATER TREATMENT WE’VE BEEN ALL THE WAY UP TO INTERNATIONAL FALLS EVEN WENT TO MINNEAPOLIS OF ALL PLACES. THEY’RE AMAZING PROJECTS IN NEED ALL OVER THE STATE; WE ALL LOVE THE CHATFIELD WHERE WE SOUGHT REPRESENTATIVE DAVIDS WHERE HE WAS A WRESTLING CHAMPION AND THEY’RE TRYING TO BUILD THAT THE POINT IS THE NEEDS ARE GREAT ALL THE STATE AND I COULD LOOK AROUND AT EVERYONE OF YOU I HAVE SEEN THE YOU IN YOUR COMMUNITIES AND THE NEEDS BETTER OUT THERE. MY QUESTION IS THIS; WHAT COULD WE DO IN THE BILL HOW BIG AND A LOT OF IT IS NOT FANCY KEEP IN MIND I SEE CHAIR BERNARDY HAD TO STEP OUT BUT A LOT OF IT GOES TO GROUPS AND DIFFERENT THINGS ON COLLEGE CAMPUSES AROUND THE STATE A LOT OF IT IS A WROTE ON WASTE WATER TREATMENT ROADS AND BRIDGES HERE IN ST. PAUL THERE’S A BRIDGE THAT’S FALLING MY COMMUNITY IN THE EAST METRO HAS IT INTERSECTION THAT NEEDS HELP. THESE ARE COMMON ALL OVER THE STATE SO WHAT WOULD A BILL WHAT SIZE OF A BILL COULD WE DO TEND MAINTAIN OUR GOOD CREDIT RATINGS AND I REALIZE WE’RE NOT GOING TO GO TO THAT NUMBER WHAT IS THE NUMBER HOW BIG IS IT? HISTORICALLY WE’VE NEVER GONE BEYOND $1 BILLION MY UNDERSTANDING IS IT’S A PRETTY BIG NUMBER WE COULD REASONABLY AFFORD AS A STATE AND PROTECT I THINK MAKE INVESTMENTS SO WHAT WOULD BE THAT ROBUST BILL THAT YOU MENTIONED?>>MR. CHAIR END REPRESENTATIVE ; ROBUST NO. I’M NOT SURE WHAT THAT RIGHT NUMBER IS ONE OF THE THINGS WE’VE HAD A DEBT SERVICE GUIDELINE IN PLACE SINCE I THINK 2008 IT’S BEEN ABOUT 11 YEARS AND WE OF THREE GUIDELINES IT’S DESIGNED TO MEASURE HOW MUCH DEBT WE HAVE OUTSTANDING OR ISSUED WITH RESPECT TO THE TOTAL PERSONAL INCOME IN THE STATE OF MINNESOTA. WE ADOPTED THAT IN PART BECAUSE THAT’S A CLUE HOW THE RATING AGENCIES AND OTHER PEOPLE LOOK AT THE ABILITY TO PAY OF THE STATE AND OUR THIRD GUIDELINE DEALS WITH PAYING OFF DEBT AND A CERTAIN NUMBER OF YEARS VERSUS OTHER YEARS. WE ANALYZED THE FIRST TWO GUIDELINES AND COME UP WITH ABOUT $3.5 BILLION IN DEBT WE COULD ISSUE IN 2020 AND STILL NOT GO BEYOND THOSE DEBT CAPACITY GUIDELINES FOR GUIDELINES WENT INTO IT WOULD DISRUPT PAYBACK TIME A LITTLE THAT WE WOULD HAVE TO WORK ON; THAT’S SORT OF THE OUTSIDE #I THINK ONE OF THE THINGS WE’RE LOOKING AT AND REMEMBER THE RATING AGENCIES TO EXAMINE THIS FROM THIS PERSPECTIVE AS WELL IF YOU LOOK AT TOTAL STATE DEBT THAT POLL STATE DEBT MEASURE AS A PERCENTAGE OF OUR STATE’S TOTAL PERSONAL INCOME; OUR STATE’S TOTAL PERSONAL INCOME IN THIS FORECAST IS $354 BILLION A YEAR THAT REPRESENTS THE MINNESOTA A RELATIVELY SMALL STATE INCOME WE’RE RIGHT IN THE MIDDLE THE PACK WHEN IT COMES TO OTHER STATES IN TERMS OF OUR TOTAL STATE DEBT COMPARED TO TOLD A STATE PERSONAL INCOME. IF YOU LOOK AT THE DEBT SERVICE THE AMOUNT WE PAY EVERY YEAR EVERY BIENNIUM AS A PERCENTAGE OF THE STATE REVENUE THAT ALSO IS LOWER IN THE TOP 18 STATES WHEN IT COMES TO HAVING LOW DEBT SERVICE COMPARED TO OUR GENERAL FUND. IRAN SPOT WHERE WE BELIEVE WE HAVEN’T BEEN OVERLY USING BONDING OR BAR WING AS A WAY WE FEEL WE CAN MANAGE THAT WELL CLEARLY THERE’S A LOT OF DIFFERENCES WE HAVE HAD OVER A BILLION DOLLARS BY THE WAY THE KEY IS DECIDING WHAT WE ARE COMFORTABLE WITH IN TERMS OF TO THAT ANNUAL DEBT PAYMENTS BUT I THINK I’VE TALKED ABOUT THIS ON THURSDAY THE GOVERNOR REITERATED AT THE SAME SAYING; WE WANT TO MAKE SURE WHAT’S IN IT IS WHAT WORKS FOR MINNESOTA. THE KEY IS WHAT OTHER KINDS OF PROGRAMS THAT REALLY LOCAL COMMUNITIES OR UNIVERSITY MINNESOTA OR MINNESOTA STATE OR THE WATER TREATMENT FACILITIES WHAT KIND OF INVESTMENT OVERALL WILL HELP THE STATE CONTINUE TO MAKE PROGRESS ONE OF THE THINGS WE’VE BEEN GOOD ABOUT IN MINNESOTA IT IS INVESTING IN A LONG TERM WE’VE MANAGED OUR BUDGET LONG TERM WE TRY TO MANAGE OUR RESOURCES TO LONG TERM I THINK THAT’S ONE OF THE THINGS THE CREDIT RATINGS AGENCIES LOOK AT US AND GIVE US A TRIPLE A RATING IN PART BECAUSE THE ABILITY OF MUST HAVE A RESERVE BUT ALSO TO TAKE CARE OF OUR INFRASTRUCTURE IN FACT IF YOU REFUSE INTO LIVE UP TO WHAT YOU SHOULD MAINTAIN IN YOUR INFRASTRUCTURE CREDIT RATINGS AGENCIES WILL START LOOKING THAT AS A CREDIT RISK BECAUSE OF SOME POINT A FINGER OR TO FAIL AND NOT GOING TO BILL TO MAINTAIN THOSE. OR ARE SO MANY AREAS WHERE WE CAN AROUND THE STATE HELP WITH LEVERAGING THE MONEY THE ASSETS WE HAVE BY BAR WING THE MAKING THOSE LONG-TERM INVESTMENTS. THE GOVERNOR IS YOU KNOW AS BEEN TRAVELING AROUND AS WELL WHICH IS A LITTLE BIT UNUSUAL AND VERY ENGAGED AND INTERESTED IN WHAT IS THE RIGHT BONDING BILL WE WILL RELEASE THAT ON JANUARY 50TH WE’RE WORKING ON IT FULL TIME NOW TRYING TO DECIDE AT PRESENT TO HIM AND THE LIEUTENANT GOVERNOR WHAT IS THAT PACKAGE LOOK LIKE SO PEOPLE AROUND THE STATE WILL KNOW THIS REALLY IS A BONDING BILL THAT FITS ALL OF MINNESOTANS AROUND THE STATE. WE’RE FOCUSING ON THE NATURE OF WHAT’S IN THE BONDING BILL I DON’T HAVE THE RIGHT NUMBER YET BUT I LOOK FORWARD TO COMING OUT AND WORKING WITH THE GOVERNOR WITH A NUMBER THAT SERVES THE PURPOSE WE NEED TO ENGAGE IN HERE.>>REP LILLIE AT THE BEGINNING OF THE MINUTE I THOUGHT SOME QUESTIONS ABOUT THE CAPITAL INVESTMENT BILL MIGHT COME UP AND I ASKED MR. MARX TO PUT TOGETHER A FEW NUMBERS AND I DID EXPRESS SOME OF THOSE SPOTS WITH THE COMMISSIONER. JUST DIFFERENT SCENARIOS WHAT THE DEBT SERVICE WOULD BE THIS COMMITTEE DOESN’T DEAL WITH THE PRODUCTS WE DEAL WITH THE DEBT SERVICE. MR. MARKS WITH THE BACK OF THE ENVELOPE NUMBERS YOU HAVE THE TICKET TROUBLES WITH THE COMMITTEE AND THEN WE CAN REFINE THOSE LATER IF NECESSARY.>>MR. CHAIR AND MEMBERS THESE AREN’T EXACTLY BACK OF THE EMPLOYEES AND MEMBERS MMB. HAS SUPPLIED US MMB …LAUGHTER… THE FORECAST ASSUMES A $755 BILLION BONDING BILL IN 2020 AND TWO UTTERED $40;000;000.20-21 GOES A TENURE AVERAGES IS NOTHING MAGIC ABOUT THEM WHAT HAPPENED IN THE EATING YOUR THE LAST 10 EVEN YEARS IS THE AVERAGE OF THOSE NUMBERS AND WHAT HAPPENED THE LAST CANNOT YEARS. $755 MILLION IS WHAT BUILT IN THE FORECAST FOR THE 2020 SESSION BONDING BILL EACH ADDITIONAL MILLION DOLLARS IN BONDING IN 2020 WOULD COST TO ABOUT $60;000 IN DEBT SERVICE IN FISCAL 2021 AND ABOUT $127;000 IN DEBT SERVICE IN FISCAL 22- 23 TO PUT THAT IN PERSPECTIVE A BILLION DOLLARS BILL WOULD COST AN ADDITIONAL $3.9 MILLION IN 2021 AND $31;000;000.2023 OF BILLION 0.5 BACK ON THE BILL WOULD COST AN ADDITIONAL $11.9 MILLION THIS IS AN ADDITIONAL ABOVE THE FORECAST 11 . $9;000;000.21 AND $94;000;000.23 I $2 BILLION BONDING BILL WOULD COST $19.8 MILLION IN 21 AND $157 MILLION IN 202322 OF 43 COST BE MUCH HIGHER WITH THE FUNCTION OF THE TIMING ON WHEN THE BONDS ARE SOLD AND THE ASSUMPTION OF NO DEBT SERVICE ADDITIONAL DEBT SERVICE COSTS OF 2020 MORE TO BEGIN FISCAL 241 AND RAMPS UP AN 22 IN 23 AS MORE BONDS ARE SOLD.>>HAVING SPENT A LITTLE TIME ON THE COMMITTEE THREE YEARS THE TYPE OF PROJECTS AND WHICH ONES ARE SHOVEL READY AT ALL THAT CAN INFLUENCE THOSE NUMBERS AS WELL. BUT HOW QUICKLY A PROJECT COMES ON LINE OBVIOUSLY WHEN WE GET READY WITH THE BUDGET RESOLUTION WE WILL HAVE FURTHER DISCUSSION ABOUT THE SIZE OF THE BILL WITH INPUT FROM THE GOVERNOR’S OFFICE AND ALSO WHAT WE HAVE AVAILABLE FOR RESOURCES. WHY THEN ADDED I SHOULD POINT OUT I DO I’VE MENTIONED THIS AT A PRESS CONFERENCE THE OTHER DAY; THIS FORECAST IS A BENCHMARK IT TELLS US WHERE WE ARE TODAY WE’RE GOING TO BE BUILDING THE BUDGET OFF THE FEBRUARY FORECAST AND THINGS MAY CHANGE UP THEY MAY CHANGE DOWN; THEY MAY REMAIN RELATIVELY FLAT I DID ASK THE STATE ECONOMIST THE OTHER DAY ABOUT THE PROBABILITIES OF DIFFERENT SCENARIOS MAYBE YOU COULD SHARE THOSE WITH US AS WE MOVE AHEAD. BASICALLY THIS IS BUILT ON A STATE OF COURSE SETTER IF YOU COULD SHARE THOSE PERCENTAGES YOU TALKED ABOUT THE OF THE DATE WHEN HE GAVE US THE BRIEFING?>>MR. CHAIR AND MEMBERS OF THE COMMITTEE; THE CHAIR I BELIEVE IS REFERRING TO THE SCENARIOS BETTER PROVIDED TO US BY THE MACRO ECONOMIC CONSULTING FIRM THEY GIVE US A BASELINE ECONOMIC SCENARIO WITH THOUSANDS OF DATA POINTS AND WE USED THE BASELINE IN CONSTRUCTING OUR FORECAST THAT YOU HEARD TODAY. THEY ALSO PROVIDE US WITH TWO ALTERNATIVE SCENARIOS ONE MORE OPTIMISTIC SCENARIO AND THE OTHER MORE PESSIMISTIC AND EACH OF THOSE AS A NARRATIVE ASSOCIATED WITH IT MEANING HERE’S HOW WE THINK THINGS FORGOT BETTER THAN WHAT WE’RE BASE LENDING AND HERE IS HOW WE THINK THINGS COULD WORK OUT LESS WELL THAN WHAT THE BASELINE SAID MAS I’M NOT SUBJECT TO PROBABLY TO THOSE THREE SCENARIOS. THE GIVE 55 PERCENT PROBABILITY TO A BASE ON WHICH MEANS THAT’S THE ONE THEY THINK IS MOST LIKELY TO PLAY OUT THEY GIVE A 10 PERCENT PROBABILITY TO A MORE OPTIMISTIC SCENARIO AND A 35 PERCENT PROBABILITY TO A MORE PESSIMISTIC SCENARIO AND THE PESSIMISTIC SCENARIO HAS A RECESSION STARTING NEXT YEAR. THE PROBABILITY ASSIGNED TO THE PESSIMISTIC TO ALL OF THEM HAS CHANGED OVER THE COURSE OF THE LAST 12 MONTHS THAT HAVE TAKEN SOME OF THE PROBABILITIES THEY DECIDE TO THE BASELINE IN THE OPTIMISTIC SCENARIO MOVE THAT TO THE PESSIMISTIC SUBMIT INCREASED THEIR EXPECTATION ON THE PESSIMISTIC SCENARIO BUT THE BASELINE SCENARIO YOU SAW TODAY AND SOUGHT IN OUR THE REAL GDP FORECAST DOES NOT HAVE A RECESSION IN THAT ENHANCED THE GROWTH THAT GOES DOWN TO 1.5% IN 2023.>>I SHOULD USE THE PHRASE THE BASELINE TO STAY THE COURSE THAT’S ESSENTIALLY WHERE IS REFERRING TO.>>TO CHAIR THAT’S HELD FOR PERMISSION. I DO WANT TO REMIND EVERYONE EVERY YEAR IS DIFFERENT ALL THE RISKS ARE ALWAYS DIFFERENT IN THESE FORECASTS BUT THE DIFFERENCE BETWEEN THE LAST NOVEMBER FORECAST IN 2018 AND FEBRUARY 2019 WAS $500 MILLION THE CLIENT. THINGS CAN HAPPEN AND I WARN THOSE PEOPLE OUT OF SPENDING MONEY AND FOR IF THE $1.3 BILLION IS HERE TODAY WE NEED TO WAIT UNTIL FEBRUARY TO DECIDE WHETHER WE OUGHT TO MAKE DECISIONS ON GOING FORWARD.>>I’VE HAD A FEW PHONE CALLS ALREADY. NEXT IS REPRESENTATIVE ALBRIGHT.>>THEY TO MR. CHAIR. A FIRST QUESTION IS FOR DR. KALAMBOKIDIS IS RELATING TO THE SLIDE FOR THE FORECAST SURPLUS VS BUDGET RESERVE. DOCTOR FOR CLARIFICATION YOU MENTIONED IN YOUR REMARKS YOU SAT THE PERCENTAGE BASED UPON AN ECONOMIC ANALYSIS YOUR DEPARTMENT PUT TOGETHER IN CORONATION WITH IHS AND OTHER ECONOMIC FACTORS I’M HOPING YOU MAY ELABORATE A LITTLE MORE ON THAT IN TERMS OF THE VARIABILITY IN THE TERMS OF HOW OFTEN IT’S CHANGED AND WHAT DETERMINE IT’S GOING TO RAISING OR LOWERING THAT’S? I HAVE MORE FOLLOW-UPS MR. CHAIR.>>MR. CHAIR END REPRESENTATIVE AND MEMBERS; OUR WE GENERATE THE BUDGET RESERVE TARGET PERCENTAGE WHICH AS A PERCENTAGE OF GENERAL FUND REVENUES IS NOT A FORECAST SO IT LOOKS AT REVENUE VOLATILITY THAT WE CAN UP TO THIS POINT IT’S NOT FORECASTING VOLATILITY GOING FORWARD. THE TWO MAIN THINGS THAT CAN AFFECT THE FORECAST AFFECT THE TARGET THE PERCENTAGE IS IF THE VOLATILITY OF ANY OF THE UNDERLYING TAX BASE IS CHANGES OF THE TAX BASE FOR INCOME-TAX; BASE FOR THE SALES TAX AND; BASE FOR THE CORPORATE; IF THE VOLATILITY OF THOSE THINGS CHANGES THAT WILL AFFECT THE TARGET THE MEASURED AND VOLATILITY AND THAT CAN HAPPEN IF SOMETHING FUNDAMENTALLY CHANGES IN THE ECONOMY. WE LOOK AT DATA ON THE TAX BASES AND WHEN I SAY MEASURE OF VOLATILITY WE LOOK AT HOW THOSE THINGS GROW OVER TIME IF YOU DRAW A STRAIGHT TRENDLINE YOU CAN SEE HOW THE BASE GROWS OVER TIME BUT IN REALITY THE BASE THEIR REVENUES THE TAX BASE MOVES AROUND THE TRENDLINE WE’RE MEASURING HOW MUCH IT MOVES UP AND DOWN AROUND THE TREND LINE WHEN IT MOVES MORE AROUND THE TRENDLINE THAT MEANS VOLATILITY HAS CHANGED. IF VOLATILITY OF THE THE UNDERLYING BASIS CHANGES THE MATCHING IS OUR BASIS AND THE OTHER THING THAT CAN CHANGE THE PERCENTAGE IF THE REPORT TAX REVENUES AND A TAX SYSTEM CHANGES IF WE SHIPPED A LOT CHANGES TAX WHAT CHANGES THE SHARE THAT WE HAVE FOR AND FROM SALES CORPORATE AND OTHER TAXES THAT CAN AFFECT THE OVERALL VOLATILITY OF THE SYSTEM SO WE LOOK AT IT AS A PORTFOLIO OF THESE REVENUE STREAMS. THOSE OF THE TWO THINGS THAT CAN AFFECT AT; 4.9% SINCE WE HAVE BEEN DOING THIS AND IT’S BEEN PART OF STATUTES THE TARGET THE TARGET IS THE STATUTORY AND WE ADD MONEY TO THE BUDGET RESERVE ” WHEN THERE’S A POSITIVE FORECAST BALANCE IN NOVEMBER AND THIS CHANGE THE PERCENTAGES CHANGE YOUR LITTLE IT’S BEEN IT IN THE VICINITY OF 5 PERCENT OF THAT TIME. THAT’S AT FIVE OR 5.1% I CAN PROVIDE YOU THE HISTORY OF THE TARGET BUT THE PERCENTAGE HAS NOT CHANGED THAT MUCH. THE DOLLAR VALUE OF A LEVEL OF A TARGET CHANGES EITHER IF THE PERCENTAGE THIS CHANGE OR TO FORECAST REVENUES HAVE CHANGED. WE SET A TARGET IN SEPTEMBER AT 4.9% AND THEN WE FORECAST REVENUES IN THIS FORECAST AND THEN APPLY THAT TARGET THE THAT PERCENTAGE.>>MR. CHAIR; THANK YOU ; DR. KALAMBOKIDIS ON THE NEXT PAGE WE TALK ABOUT THE SUPPORT YOUR RECEIVING FROM IHS THE ECONOMIC WITH REGARDS TO FORECAST FOR THE GDP BOTH FOR PAST AND FUTURE YEARS. I’VE NOTED THAT EVERY SUBSEQUENT YEAR WHEN COMPARED WITH IT WILL MATCH TO GO BACK AND SEE WHAT THERE WERE FORECASTING AT ANOKA SOME VOLATILITY IN OBVIOUSLY IT YOUR MARKETING YEAR WHERE’S YOUR NOT GOING TO SAY WHAT YOU’RE FORECASTING MR. WOULD YOUR ACTUALS ARE YOU MAY RUN OLD ADAGES IF YOU PUT 10 ECONOMISTS AND ROOM PRESENT CABINET ACCEPTED IT OR DID IT 12 OPINIONS. I’M WONDERING IF YOU YOU WOULD AFFORD US THE OPPORTUNITY TO SEE WHAT THE FORECASTED GDP MIGHT HAVE BEEN A FOR THOSE YEARS VS. FORECAST BECAUSE ” BETTER PART OF THE DECADE WE’VE BEEN KIND OF MENTION AT 1.5 PERCENT GDP WAZLAWIK OF 04. SUBSEQUENT TO THAT WE GET SOME VERY ROBUST QUARTERS AND SUBSEQUENT TO THAT NOW THE NEW NORM IS SOMETHING NORTH OF 215 OR 3% AND TO EXPECT THESE NUMBERS AND IN OUTLYING YEARS TRILLING OFF AND GOING BACK TO MY EARLIER SUBMISSION RESPECTFULLY I THINK THESE ARE ALL FORECASTED NUMBERS SUBJECT TO CHANGE EVERY TIME WE GET TOGETHER. THAT’S JUST A COMMENT ON THAT ONE IF WE COULD RECEIVE WHAT WAS FORECAST FOR RECORD OF THOSE YEARS AND WHAT CHANGE OCCURRED THAT LED YOU TO CHANGE YOUR FORECAST? I WILL MOVE TO BUSINESS INVESTMENT SLOWED UNDER FORECASTED RISK. COULD YOU QUANTIFY IT EITHER IN DOLLARS OR PERCENTAGES WHAT YOU MEAN BY INVESTMENT IN SLOWDOWN?>>MR. CHAIR; REPRESENTATIVE MEMBERS OF THE COMMITTEE; FIRST LET ME ACTUALLY START TO ANSWER YOUR FIRST QUESTION ABOUT FORECAST CHANGE. WE CAN TRY TO FLESH OUT A MORE COMPLETE ANSWER FOR YOU. FOR REFERENCE ON PAGE 69 OF THE FORECAST BOOK WE DO PRESENT A TABLE SHOWING HOW IHS FORECAST HAS CHANGED FOR PARTICULAR YEARS OVER THE COURSE OF THE TIME WE’RE FORECASTING THOSE YEARS YOU CAN SEE HOW THEIR FORECAST FOR REAL GDP OF 419; 20 AND GOING ALL THE BACK TO 2014 YOU CAN SEE HOW THOSE FORECASTS CHANGED OVER TIME YOU CAN SEE THAT WE ALSO PRESENTS AN ALTERNATIVE FORECAST SLIDES FROM OTHER FORECASTERS YOU CONCEDE THOSE AND THE CAN’T COUNSEL OF AMERICAN ADVISERS STATEMENT ” WAS ALSO AN AIRPORT GIFT BOOK WE ALWAYS MAKE AN ASSESSMENT OF WHERE IHS IS RELATIVE TO OTHER MACRO ECONOMIC FORECASTERS AND WE POINT OUT WHEN THEY DIFFER . FOR THIS ONE THEY’RE VERY CLOSE TO WHAT BLUE CHIP CONSENSUS FORECASTS ARE FOR 2019 AND 2020. REGARDING A SINGLE FORECAST HOW FAR OFF THE FORECAST MIGHT BE WHEN YOU END UP THERE WE DO PRODUCE THAT TWO WEEKS AFTER EVERY FORECAST WE PRODUCE A REPORT SHOWING HOW BASED ON OUR HISTORY OF HALT OUR FORECAST AND IT OR HOW THE BIENNIUM ENDED UP RELATIVE TO WATER FORECAST WAS. I WELCOME YOUR FEEDBACK ON THAT REPORT WHEN YOU SEE THAT IT IN TWO WEEKS. I’VE FORGOTTEN WHAT YOUR OTHER QUESTION WAS.>>YOU MENTIONED AND BUSINESS INVESTMENT SLOWDOWN NEWLY ELABORATED TO EXTEND WELL CONSUMER SPENDING HAS INCREASED IN A NUMBER OF REGARDS ALLERY; I’M CURIOUS AS TO THE CONNECTEDNESS TO THE OTHER FORECAST RISKS THAT YOU SHARE IS THEIR DOLLAR AMOUNT OR PERCENTAGE POINT THAT IHS OR OTHERS ARE ATTRIBUTING TO BUSINESS INVESTMENT SLOWDOWN?>>MR. CHAIR REPRESENTATIVE AND MEMBERS OF THE COMMITTEE; WE DISCUSSED THAT ON PAGE 13 OF THE FORECAST BOOK AND WE HAVE A BAR CHART I DIDN’T PUT A PRESENTATION BECAUSE ABOUT READ TOO MANY CHARTS BUT IT SHOWS THE FORECAST CHANGE FOR SPECIFIC INVESTMENT FOR EVERYONE’S BENEFIT IF WE MEAN BY BUSINESS SPECIFIC INVESTMENT IS BUSINESS PURCHASES OF EQUIPMENT STRUCTURES AND INTELLECTUAL PROPERTY IS SO WHAT BUSINESSES PURCHASE IN ORDER TO PRODUCE GOODS AND SERVICES. IT’S TIED TO THE MANUFACTURING ECONOMY ALTHOUGH IT’S NOT ONLY THE MANUFACTURING ECONOMY SO WE DISCUSSED IN THE BOOK THE RELATIONSHIP AND A SLOWDOWN IN MANUFACTURING OF THE U.S. LEVEL WHICH AS RESULTED IN THE DECLINE IN EMPLOYMENT IN THAT SECTOR AND THE CHANGE IN BUSINESS INVESTMENT AND IN THAT CHART WILL SHOW THE FORECAST CHANGE FOR 2019 WAS SEDENTARY I JUST EXPECTED 3.6% ANNUAL PERCENTAGE GROWTH IN BUSINESS FIXED INVESTMENT IN THE FORECAST ITS 2.2% FOR NEXT YEAR THEY HAD 2.8% IN FEBRUARY NOT HAVE 1.7% AND THE RELATIVELY SMALLER CHANGES IN THE SUBSEQUENT YEARS THAT OVERALL IT’S A DECLINE IN GROWTH IN BUSINESS FIXED INVESTMENT THROUGHOUT THE FORECAST HORIZON.>>THANK YOU. FOR THE BUDGET DIRECTOR; ON THE NEXT COUPLE PAGES WHEN WE TALK ABOUT THE CHANGES IN THE SEPARATE ACCOUNTS OF THE STATE BUDGET; I WANT TO DRAW YOUR ATTENTION TO HEALTH AND HUMAN SERVICES PARTICULARLY IN SEE A LOWER ENROLLMENT FOR THE M.A. BASIC CARE AND STAND ABOUT THAT BASIS ON THE RESURGENT ECONOMIC OUTLOOK IT SEEMS LOGICAL. I’M WONDERING IF YOU ARE THE COMMISSIONER WHAT IT ELABORATE IN TERMS OF WHAT’S GOING ON IT DHS RIGHT NOW AND WHAT IF ANY CONCERNS ARE CONSIDERATIONS YOU MENTIONED YOUR WORKING ON IN THE NEXT BIENNIAL BUDGET DOESN’T SOUND LIKE WE SHOULD BE THINKING ABOUT A SUPPLEMENTAL BUDGET BASED UPON WHAT’S ON THE BOTTOM LINE AFTER YOU SUGGEST WE INCLUDE INFLATION BUT I’M WONDERING WHAT EFFECT THAT WOULD HAVE ON TRIBAL COMMUNITIES INDIVIDUALS OR PARTICULAR COUNTIES THAT ARE NOW SAYING WE’RE GOING TO HAVE KIND OF ANSWERS CONVERSATION ABOUT MONEY THAT’S OWED BACK TO THE STATE. COUNTIES ARE VIEWED AS ADMINISTRATORS OF STATE APPROPRIATIONS NOW WE’RE ASKING THEM TO COME UP WITH EXTRA MONEY FROM THE TAXPAYERS IN THOSE COUNTIES. I’M WONDERING HOW YOUR RECONCILING THOSE DIFFERENCES?>>REPRESENTATIVE DAN MR. CHAIR I TALKED A BIT ABOUT THE TROUBLE PAYMENT ISSUE WITH THE QUESTION FROM REPRESENTATIVE DRAZKOWSKI WE’RE ASSUMING A REPAYMENT FROM THE TROUBLE GOVERNMENTS IN THIS FORECAST WHICH MEANS THE REPAYMENT TO THE FEDERAL GOVERNMENT IS OFFSET BY RECEIVED BACK FROM THE TRIBAL GOVERNMENTS THAT’S BECAUSE THAT’S WHAT CURRENT LAW REQUIRES. MORE FORECAST IS A CURRENT LOSS FORECAST WE FULLY RECOGNIZE THIS WOULD BE A DISCUSSION DURING THE LEGISLATIVE SESSION BUT OUR FORECAST IS THE CURRENT LAW FORECAST SO THAT’S OUR WE ASSUME IN THE FORECAST. THE SAME WITH A SEPARATE ISSUE THAT’S BEEN COVERED IN THE NEWS ABOUT CHEMICAL DEPENDENCY SERVICES OFFERED AT WHAT’S CALLED I’M THE INSTITUTES OF MENTAL DISEASE INSTITUTIONS WITH 60 OR MORE THAT’S ANOTHER TOPIC THAT’S BEEN COVERED THIS FORECAST DOES ASSUME REPAYMENT TO THE FEDERAL GOVERNMENT AND THERE’S A PORTION OF THAT THAT’S ATTRIBUTABLE TO COUNTIES THE COUNTY SHERIFF IS ASSUMED IN THE FORECAST AND AGAIN THAT’S BECAUSE CURRENT LAW REQUIRES COLLECTING BACK FROM COUNTIES AND TRIBES ON THE TROUBLED PRIVATE ISSUE AGAIN IT’S SOMETHING I’M ASSUMING WILL BE DISCUSSED DURING THE LEGISLATIVE SESSION BUT WE ASSUME CURRENT LAW WITH THE FORECAST.>>MR. CHAIR; AND REPRESENTED BY WOULD LIKE TO GO LITTLE FURTHER WITH YOUR INVITATION AND I’VE BEEN SPEAKING A LOT WITH COMMISSIONER HARPSTEAD AS YOU KNOW WHO IS BETTER DISTAL OVER 90 DAYS AND I THINK I CAN TRUTHFULLY SAY THE GOVERNOR AND COMMISSIONER HARPSTEAD AND A SENIOR MANAGEMENT A DHS IS CONCERNED ABOUT SOME OF THESE ISSUES THAT COME UP IN TERMS OF DISCOVERING THEM AND NOT DISCOVERING THEM AS EARLY AS THE WOULD LIKE TO. CLEARLY THERE SOME CHALLENGES TO MAKE SURE OUR INTERNAL CONTROLS WHICH IS HOW WE TRY TO MANAGE THE STATE GOVERNMENT BOTH FROM A MACRO POINT OF VIEW AS WALLACE AS A FORECAST BUT FROM A MICRO POINT OF VIEW FROM THE DIFFERENT AGENCIES IT’S SOMETHING IMPORTANT WAS TO MAKE SURE WE DON’T HAVE ANY FRAUD WASTE OR ABUSE WHEN ISSUES ARISE ONE OF THE THINGS COMMISSIONER HARPSTEAD IS DOING IS FOCUSING ONE OF WAYS YOU CAN INSTITUTE MORE CONTROL MORE ANALYSIS OF WHAT’S CHORION SHE’S SETTING A LOT OF DIFFERENT WAYS TO MANAGE THAT AGENCY AND STUDDING THE BEST RECORD AGENCY TO BE STRUCTURED AS WELL WITH THE ONGOING ISSUES HOW WE SHOULD GO ABOUT DOING THAT. WE’RE IN THE PROCESS OF DOING A LOT OF THAT WORK THINK I’M CONCERNED ABOUT I KNOW THE GOVERNOR IS CONCERNED ABOUT IT AND IN NO COMMISSIONER HARPSTEAD IS WORKING DAILY ON TRY TO MAKE SURE THESE UNUSUAL CIRCUMSTANCES ARE DEALT WITH AND THEY DON’T HAPPEN BUT WHEN THEY DO HAPPEN YOU KNOW ABOUT THEM EARLY THE GOAL IS TO ANALYZE AND PUT IN BETTER CONTROL OF TO MONITOR THESE KINDS OF ISSUES GOING FORWARD. I KNOW THAT’S WHAT SHE’S WORKING ON FULL- TIME.>>COMMISSIONER THANK YOU MR. CHAIR; WHILE I APPRECIATE THE STRONG AND ROBUST PROCESS CONTROL THAT’S FORWARD-LOOKING. WHAT WE’RE LOOKING AT NOW AS COMMISSIONER HARPSTEAD TALKED ABOUT WHEN SHE PRESENTED HER 90 DAY PLAN BEFORE HEALTH AND HUMAN SERVICES FINANCE LAST WEEK I DIDN’T HEAR A LOT IN TERMS OF WHAT THEY’RE GOING TO DO TO RECTIFY AND TO YOUR ANSWER TO MY EARLIER QUESTION; IT SOUNDS TO ME LIKE THE ERRORS OF THE STATE AND THE LARGEST AGENCY IN MINNESOTA ARE GOING TO SOME EXTENT BE THE RESPONSIBILITY FINANCIALLY OF THE COUNTY’S BASED UPON ASSERTIONS AND PROMISES OR STATEMENTS MADE BY THE AGENCY TO THE COUNTIES IN TERMS OF HOW THAT WAS SUPPOSED BE DONE IN THE PAST AND BY THE WAY NOW WE MADE AN ERROR IN EUROPE; PUT THE MONEY. WOULD YOU RESPOND COUNTIES SAYING IT WASN’T OUR FAULT YOU OVERSPEND MONEY AND NOW YOU’RE MAKING US A DOUBLE DOWN HAVE TO COME UP WITH MORE MONEY OUT OF OUR COUNTY TAXPAYERS TO PLACATE AND FIX THE PROBLEM AT A STATE AGENCY HOW WOULD YOU RESPOND TO THAT?>>STICKER AND REPRESENT I KNOW HOW THEY’RE RESPONDING ANALYST TO TALK TO THEM. ONE OF THE ISSUES THEY WANT TO DISCUSS WITH THE COUNTIES IS THE BEST WAY TO PROCEED THE FACT WE HAD THESE ISSUES AND OUR CURRENT LAWS BUDGET DIRECTOR REITAN DESCRIBED THE BE WE CAN GET TOGETHER AND TALK ABOUT WAYS TO SOLVE THOSE PROBLEMS TOGETHER. I KNOW DHS AND COMMISSIONER HARPSTEAD IS IN DIALOGUE WITH THOSE COUNTRIES ABOUT THAT VERY SPECIFIC ISSUE.>>MR. CHAIR AND COMMISSIONER I’VE A QUESTION WITH REGARD TO PAGE 12 WHEN YOU’RE TALKING ABOUT PLANNING ESTIMATES AND TALKING ABOUT THE BUDGET RESERVE. THE ONLY RED NUMBER ON THAT PAGE IS TO MY WAY OF LOOKING AT IT IS AN ANOMALY WE HAVE ESTABLISHED IN STATE STATUTE AS DR. KALAMBOKIDIS SAID IT IS HER PURVIEW TO SET WHAT THE PERCENTAGES I UNDERSTAND THAT; NOW IT SEEMS TO ME I WOULD WELCOME RESPONSES SINCE A $491 MILLION TRANSFER WERE TALKING ABOUT STRUCTURAL BALANCE IS REALLY TO COVER THE OVER EXPENDITURE THAT WAS PUT INTO LOT IN THE LAST BUDGET BASED UPON THREE PEOPLE IN THE ROOM DECIDING WHAT THE BUDGET IS AND YOU TOOK IT OUT OF THE BUDGET RESERVE AS OPPOSED TO HOLDING THE LINE ON SPENDING BECAUSE WHAT’S THE BUDGET RESERVE WITH ALL RESPECT THE BUDGET RESERVE IS THERE FOR A RAINY DAY WHEN ECONOMIC CONDITIONS TO THE DOCTOR’S POINT CHANGE MATERIALLY. THE ONLY THING THAT CHANGED MATERIALLY IN THE LAST BUDGET BIENNIUM DECISIONS WERE THREE PEOPLE THE ROOM DECIDED TO SPEND MORE THAN WHAT BOTH CAUCUSES AGREED TO THAT’S NOT AN ECONOMIC CHANGE THAT THE DECISION PROBABLY MADE BY THREE PEOPLE THAT AFFECT ALL THE MINNESOTA TAXPAYERS. HOW WOULD YOU RESPOND THAT?>>MR. CHAIR AND REPRESENTATIVE I THINK WE NEED TO BACK UP TO THE BEGINNING OF THE SESSION NUMBER ONE. CERTAINLY THE GOVERNOR HAD PROPOSED BUDGET THAT RAISED REVENUES AND THE SUPPORT OF ALL THE SPENDING HE PROPOSED THE HOUSE HAD OPPOSED THE BUDGET THEY PASSED THAT WOULD INCREASE REVENUES AND PAID FOR THE PROGRAMS THERE WHAT IT TO SPEND AND THE SENATE HAD ANOTHER PROPOSAL THAT WAS AT ODDS WITH THOSE DIFFERENT BUDGET PROPOSALS. IN THE CLASSIC SITUATION WHERE YOU HAD DIVIDED GOVERNMENT NO ONE IS BORN TO GIVE EVERYTHING SO I THINK WHAT YOU SAW WAS A COMING TOGETHER OF THREE DIFFERENT LEADERS THE SPEAKER THE MAJORITY LEADER AND THE GOVERNOR TO TRY TO RECONCILE THE SPENDING THAT THEY’RE ALL THOUGHT WAS NECESSARY AND YET ON THE OTHER HAND THERE WAS A DECISION TO HAVE A TAX NOT TO RAISE REVENUE AND INCREASING REVENUES IN A POSITION THAT LEFT THE AGREED UPON SPENDING NOW WITHOUT AGREED UPON REVENUE RAISING AMOUNT TO COVER THE SPENDING THAT’S WHY THE $491 MILLION WAS USED TO COVER THE SPENDING THAT WAS APPROVED TO MAKE SURE THERE WAS NO BUDGET IN BALANCE IN 22 AND 23. IT WAS AN ACCUMULATION AND CULMINATION OF A LOT OF HARD WORK BY A LOT OF JURORS WORKING WITH LEADERS COMING TOGETHER AND I DURING THE END OF SESSION AND ALLOW A LOT OF WORK WAS DONE AT THE COMMITTEE LEVEL IT’S TRUE THAT THE AND THERE WAS AN ACCOMMODATION THERE WAS REACHED BY THE THREE LEADERS BECAUSE OF THE NEED TO REACH A BUDGET AGREEMENT. THIS WAS THE BUDGET RESERVE CAN ALWAYS BE TAPPED IF THE LEGISLATURE SAYS NOTWITHSTANDING THAT THERE WANT TO TAP INTO IT FOR WHATEVER REASON WE BELIEVE THE PROPER STATUTORY PURPOSE FOR SPENDING ON A THAT IS FOR ECONOMIC DOWNTURN BUT IN THIS CASE IT WAS USED TO REACH A BUDGET DEAL AND ALL THREE LEADERS AGREED UPON. I THINK I WOULD REITERATE THE FACT THAT ALL THE PROCESS WORKED IT WAS DIVIDED GOVERNMENT WE REACHED THE BUDGET DEAL ALL THREE LEADERS WERE ABLE TO SIGN OFF ON TIME AND I WILL LEAVE IT AT THAT.>>MR. CHAIR I WILL RESPECTFULLY DISAGREE WITH THE COMMISSIONER THAT WE HAD TO USE. IT’S IMPORTANT WE BECOME A PROCESS WHERE PROCESS IMPROVEMENTS ARE MORE IMPORTANT CONSEQUENCES FOR PAST ACTIONS ALSO IMPORTANT OUR BUDGET DECISION MAKING PROCESS HAS MORPHED INTO IF YOU CAN’T COVER WITH HIM THE CHECK BOOK WILL FIND ANOTHER LITTLE STATE BUDGET RESERVE AND PULL WHAT YOU NEED OUT OF THERE TO COVER THE TALES. IT WASN’T A RAINY DAY FUND THEIR MAKING IT INTO IT’S NOT A RAINY DAY FUND TO COVER THE LARGESS OF THIS DID MINISTRATION AND THE DECISIONS OF INCREASING THE BUDGET THAT IS OUT OF CONTROL. RATHER THAN AN ECONOMIC DOWNTURN WE SEE CONTINUED ECONOMIC GROWTH THAT DOES NOT SUPPORT RATING THE RAINY DAY FUND. THAT SUPPORTS MAKING SURE THAT WERE DILIGENT ABOUT WHAT WE’RE SPENDING MINNESOTA TAXPAYERS MONEY; AND I WILL LEAVE IT AT THAT.>>THANK YOU REPRESENTATIVE DAVIDS. IF FOLKS CAN BE BRIEF SO WE CAN UNDER OUR GENERAL TIME FRAME OF ABOUT TWO HOURS.>>DID HE SAY THAT YOU ADDRESS? THANK YOU MR. CHAIR A COUPLE OF THINGS FIRST I THINK THESE RESULTS I WOULD LIKE TO THANK THE THREE FOLKS WHO TESTIFIED TODAY. IT’S A NICE FORECAST A DIRECT RESULT OF THE TORIES 17 TAX BILL GENERALLY TAX BILLS TAKE ABOUT TWO YEARS TO SHOW THE RATE OF I THINK THAT’S VERY CLEAR UNDISPUTED THE 2017 TAX BILL HAS PUT THIS IN THIS SITUATION. THAT BEING SAID WITH COMMISSIONER FRANS I WAS CURIOUS ABOUT YOUR DEFINITION OF ROBUST BUT I THINK YOU HAVE A BAT WELL CHAIR AT DAUDT LILLIE QUESTION EITHER QUESTION ON PAGE 20 OF THE BUDGET FORECAST IT SHOWS A PERSONAL INCOME IS ABOUT 4 PERCENT SPENDING IS MORE THAN NOT; LONG IS THAT SUSTAINABLE HOW WE SUSTAIN THAT?>>MR. CHAIR AND REPRESENTATIVE THANK YOU FOR THE QUESTION. ONE OF THE KEY CONCERNS I THINK WE ALL SHARE WITH THE LEGISLATURE ENDED MINISTRATION WILL SHARE IS MANAGING AND MAKING BUDGET DECISIONS THAT TAKE INTO ACCOUNT THE REALITY OF HOW FAST REVENUES ARE ANTICIPATED TO GROW OR DO WE WANT TO CHANGE THAT WE ARE TO ADD TO THAT OR SUBTRACT FROM THAT? THE SAME THING WITH EXPENDITURES THE KEY WE HAVE THE FISCAL DISCIPLINE WITHIN THE COMMITTEE AND OTHER COMMITTEES TO ANALYZE PROPOSALS TO WAIT KEEP THE EYE ON THE LONG-TERM REVENUE GROWTH PROJECTED REVENUE GROWTH AND EXPENDITURE GROWTH AND NOW WE ARE AFFECTING THOSE IN THE DECISIONS WE MAKE GOING FORWARD. YES; IF YOU LOOK AT AT 22 AND 23 SEE THE TWO UTTERED $20 MILLION DIFFERENCE IN REVENUES GROWING FASTER THAN EXPENDITURES IS PRETTY CLOSE. WE CAN EASILY BE CHANGED BASED ON DIFFERENT FACTORS IN THE ECONOMY WE’RE CONCERNED ABOUT THAT AS A THINK YOU ARE AND I THINK THE KEY IS TO MAKE SURE WE MAKE SOUND LONG-TERM FISCAL DECISIONS TO KEEP US ON TRACK THAT’S ALL I CAN REALLY ADVISE.>>REPRESENTATIVE DAVIDS.>>THANK YOU MR. CHAIR I’M SPLASHING BACK TO THIS TIME OF THE YEAR IN 2010 WHEN WE WERE PRESENTED TO WITH A $6.2 BILLION SHORTFALL. IN MY MIND WHEN I LOOK IT IS FORECAST I DO FEEL VERY GOOD ABOUT WHAT WE OF DONE BECAUSE WE DID AT $6.2 BILLION SHORTFALL AND TOOK CARE OF VAT AND UNI WHEN WE BOTH HAD DIFFERENT ROLES AT THAT TIME SO I DO WANT A THANK YOU FOR THOSE EFFORTS BACK THEN AND WHAT YOU’RE DOING TODAY. MR.>>CHAIR END REPRESENTATIVE I TELL THE STORY AT THAT TIME WHEN I MET THE GOVERNOR IN LATE 2010 TO BE DIVERTED TO BE READY COMMISSIONER AND HAD A GOOD MEETING AND HE OFFERED THE JOB AND I TOLD MY WIFE ABOUT SHE SAID THAT RITCHIE SAID DID YOU EXCEPT I? SAID GUESS SHE SAID HOW REGARDLESS OF THE $6.2 BILLION DEFICIT KNEW THOSE WERE TOUGH TIMES I PRITCHETT RECOGNITION THERE MR. CHAIR REPRESENTATIVE BACK IN THOSE DAYS THOSE WERE TOUGH DAYS A BANK YOU.>>SEVERAL THIS HAD DIFFERENT ROLES AT THAT POINT IN TIME. NEXT IS REPRESENTATIVE VOGEL .>>THANK YOU MR. CHAIR. I TEND TO LOOK AT THE BONDING THING A LOT AND I’M HEARING $3 BILLION AND I THINK THE COMMISSIONER MAY HAVE SAID THAT IN HIS PRESENTATION REMIND YOU GIVE SOMETHING LIKE THAT. I HAVEN’T HEARD EXACTLY ONCE THAT IS FULLY PHASED IN WHAT THE ANNUAL DEBT SERVICE WOULD BE ON BACKED. I KNOW I SOUGHT A 3.9 AND $31 MILLION IS THERE ANY ESTIMATE OF WHAT $3 BILLION IN BONDING COSTS THE GENERAL FUND EACH YEAR IN PAYMENTS?>>MR. MARKS SAYS HE DOESN’T HAVE THAT READILY AVAILABLE.>>FOR THE SAKE OF DISCUSSION; LET’S JUST ASSUME IT’S 4 PERCENT THAT’S $120 MILLION A YEAR AND $240 MILLION EACH BIENNIUM. WE JUST GOT DONE TALKING ABOUT THE 27% DECREASE IN THE BUDGET RESERVE ABOUT WE NEED TO PUT. I GUESS AS I LISTEN TO THAT EITHER WE SHOULDN’T BE PUTTING IN 4.9% OR 3.6% IS OK BECAUSE THUS WHAT WE’RE GOING TO. I TAKE THAT $491 MILLION ESPECIALLY BEING IN THE FINANCIAL INDUSTRY HOURS ANALYZING THAT I WOULD SAY THAT KIND OF FUNNY MONEY THAT’S BEEN THERE. THE BOTTOM LINE IS REALISTICALLY IF WE WEREN’T PLAYING WITH THOSE NUMBERS WOULD HAVE A TWO UTTERED $71 MILLION DEFICIT IN THE OUT BIENNIUM OF 22-23 WHICH IF YOU HAVE ANOTHER $120 MILLION A YEAR OR TWO UTTERED $40 MILLION EACH BIENNIUM AND DEBT SERVICE OR WELL OVER HALF A BILLION DOLLARS THAT YOU’RE PROJECTING IN THE OUT BIENNIUM BY SPENDING MONEY ON BONDING WHICH I’M NOT SAYING WE DON’T NEED TO D O THINGS I’M NOT SAYING INTEREST RATES ARE LOW; BUT WE’RE PUTTING OURSELVES IN A POSITION JUST LIKE IF YOU BUY A NEW HOUSE YOU BUY A NEW CAR YOU’RE GOING TO MAKE THOSE PAYMENTS WILL LENGTH OF THE TERM. IF WE TAKE THE FUNNY MONEY OUT OF IT HAD THE ADDITIONAL DEBT WE’RE DOING WE’RE LOOKING AT PUTTING THE TAXPAYERS OF MINNESOTA POSSIBLY ON THE HOOK FOR HALF A BILLION DOLLARS DEFICIT IN 2822 AND 23 AND I KNOW AND MAYBE WILL UNFAIR TO THROW NUMBERS AND SAY COMMISSIONER WITH THOSE ASSUMPTIONS I’M MAKING THE CORRECT? ANY COMMENTS ? MR.>>CHAIR I THINK THE BUDGET DIRECTOR HAS A COMMENT.>>MR. CHAIR END REPRESENTATIVE I WANT TO MAKE SURE I’M TRACKING WITH THE MATH YOU WERE JUST DOING. THE 491 WAS COMING OUT OF THE RESERVE THAT DOESN’T CONTRIBUTE TO THE STRUCTURAL SITUATION BETWEEN REVENUES AND EXPENDITURES BECAUSE THAT ADJUSTS THE RESERVE TARGET LINE. EVEN WITH THE 41 BEING RESTORED THEY’RE STILL TWO UTTERED 20 IN STRUCTURAL BALANCE BETWEEN REVENUES AND EXPENDITURES.>>MR. CHAIR END REPRESENTATIVE YOUR POINT ABOUT ADDING THAT; WE WOULD NEVER DISAGREE YOU WANT TO BE CAREFUL TO WHAT IS OUR ANNUAL DEBT SERVICE? ABOUT 14 $1 BILLION SO AND THAT’S LIKE I SAID IF YOU COMPARE THAT TO THE OTHER STATES WERE THE TOP 18 STATES IN TERMS OF HAVING MODEST DEBT TO GENERAL FUND REVENUES. CLEARLY YOU WANT TO WATCH THAT WE DON’T DISAGREE ABOUT BEING CAREFUL ABOUT HOW MUCH YOU HAD AND I’VE NEVER SAID WE SHOULD DO A THREE OR $3.5 BILLION YACHT. I DON’T DISAGREE WITH THE NEED TO BE CAREFUL ABOUT THAT AND MONITOR WHAT IS THAT GOING TO DO TO THE BUDGET CORING FORWARD? I DON’T KNOW IF THAT ANSWERS YOUR QUESTION.>>THANK YOU MR. CHAIR I REALIZE. IT WAS AN EXAMPLE OF WHAT CAN HAPPEN HERE. I THINK IN PRUDENCE I HEAR THIS WE HAVE THIS SURPLUS AND A WICKED BOND FOR MORE; I DID HAVE A QUESTION WHEN YOU HAVE DEBT SERVICE OF $1 BILLION DOES THAT INCLUDE JUST GENERAL OBLIGATION OR IS THAT ALL THE APPROPRIATION AS WELL AS G O BONDS FOR THE BIENNIUM?>>MR. CHAIR AND REPRESENTATIVE I’M LEARNING FOR MERCK MY READ IT’S JUST THE GENERAL OBLIGATION BONDS THAT NUMBER REPRESENTS.>>IT MAY BE HELPFUL IF PEOPLE ARE LOOKING AT THINGS TO ACTUALLY HAVE THE ACTUAL DEBT SERVICE WE’RE DOING. ONE OTHER CLARIFICATION OF THE COMMISSIONER YOU SAID THE TEST WITH A TEST FOR DEBT SERVICE AND IT’S ALWAYS BEEN MY UNDERSTANDING WE HAVE THE TEST FOR DEBT OUTSTANDING AS WELL AS DEBT MATURITY. WE DON’T HAVE A TEST FOR DEBT SERVICE IN OTHER WORDS LOOKING HOW MUCH OF OUR GENERAL FUND WE’RE HAVING TO EXPAND FOR THE PAYMENTS WOULD THAT BE FAIR TO SAY?>>MR. CHAIR AND REPRESENTATIVE YES.>>I THINK AS WE LOOK AT THIS AND I’VE ALWAYS ADVOCATED FOR PRUDENCE WE REALLY HAVE TO START LOOKING AT HOW MUCH COVER BUDGET ARE WE SPENDING IN DOLLARS THAT COULD BE GOING TO OTHER THINGS FOR DEBT SERVICE? IF WE GET AGGRESSIVE TO GET INTO THE $3 BILLION RANGE HOW MUCH MORE WE TAKING FROM EDUCATION FROM ROADS AND EVERYTHING ELSE BECAUSE THAT’S GOING TO BE THERE FOR 20 YEARS AS IT AMORTIZES I THINK WE HAVE TO BE CAUTIOUS ON THAT THANK YOU MR. CHAIR.>>WE HAVE NEXT REPRESENTATIVE HAMILTON .>>Q. MR. CHAIR COMMISSIONER MY QUESTIONS PERTAIN TO THE HEALTHCARE ACCESS FUND. I WOULD LIKE TO KNOW WHAT THE CURRENT PROJECTED BALANCES OF THAT FUND WHAT THEY ARE IS IT REFLECTED IN THE FORECAST AND I HAVE A FOLLOW-UP QUESTION.>>MR. CHAIR BUDGET DIRECTOR REITAN WILL ANSWER THAT AND SHE’S LOOKING FOR THAT MEMBER I WANT TO REITERATE THE FACT WE HAVE A BUDGET BOOK THAT’S ON OUR WEBSITE AT MMB. GUV AND IF YOU HADN’T HAD A CHANCE TO LOOK AT THAT IT’S A GOOD READ AND I RECOMMEND IT HIGHLY.>>MR. CHAIR AND REPRESENTATIVE THE HELL; CARE ACCESS FUND IS CARRIED IN OUR CONSOLIDATED FUND STATEMENT WHICH IS BEING RELEASED TODAY ON OUR WEB SITES. IT’S USUALLY A COUPLE OF DAYS BEHIND THE GENERAL FUND FORECAST THERE’S ALSO THE NARRATIVE EXPLANATION OF THE CHANGES TO THE HEALTHCARE ACCESS FUNDED. CURRENT PROJECTIONS FOR THE END OF 2021 THE PROJECTED BALANCE OF THE HEALTHCARE ACCESS FUND IS $538.9 MILLION THE END OF 2023 THE BALANCE WOULD BE $279 MILLION SO THIS IS A DECLINING BALANCE AND THAT IS BECAUSE BEGINNING IN 2021 THE STRUCTURAL BALANCE IN THAT FUND IS- CURRENTLY.>>THANK YOU MR. CHAIR. TO THE DIRECTOR DOES THAT REFLECT LEGISLATION THAT WAS PASSED THIS LEGISLATIVE SESSION REINSTATING AT LEAST A PORTION OF THE PROVIDER TAX?>>CHAIR AND REPRESENTATIVE YES IT DOES.>>THANK YOU MR. CHAIR BY. FINAL QUESTION IS THE WAY THOSE DOLLARS ARE ALLOCATED IS THAT CLEARLY OUTLINED AS DIRECTED BY THE LEGISLATURE GORING FORWARD?>>MR. CHAIR END REPRESENTATIVE IS YES THERE’S A PORTION OF IT THAT’S PAYING FOR MEDICAL ASSISTANCE AND A PORTION THAT IS PAYING FOR MINNESOTA CARE AS WELL AS SOME PROGRAMMING AT DHS AND MDH AND THAT’S ALL DETAILED IN A STATEMENT THAT WILL BE POSTED ON LINE.>>THANK YOU MR. CHAIR.>>THAT TEXAS TO THE BOTTOM OF THE LIST. JUST A QUICK COMMENT REPRESENTATIVE ALBRIGHT I’M NOT THAT INTERESTED IN DEBATING THE USE OF THAT MONEY BECAUSE I WAS NOT WANT THAT WAS FAVORABLE TOWARD TAKING THAT $491 MILLION FROM THE RESERVE ACCOUNT WHEN YOU FOLKS WERE IN CONTROL WITH THE PREMIUM SUBSIDY PROGRAM; YOU TOOK THREE ADDED $26 MILLION OUT OF THE RESERVE ACCOUNT FOR THAT PURPOSE. MY ONLY POINT RATHER THAN DEBATING IT IS TO SIMPLY SAY BOTH SIDES OF THE AISLE HAVE SOME GUILT ON THAT AND I’M NOT DEBATING THE PURPOSE IS SOMETHING THAT HAPPENS WHEN WE HAVE THE PRESS CONFERENCE I ALLUDED TO THE OTHER DAY; BOTH THE SENATOR COHEN AND I COMMENTED ON THE NEED TO PROTECT THE RESERVE BECAUSE I DO VIEW IT AS A RAINY DAY FUND. I WAS AT THE TABLE IN NEGOTIATIONS GOING ON UNTIL THE FRIDAY NIGHT BEFORE THE DECISION WAS MADE TO NARROW IT TO THREE PEOPLE; AND I KNOW HOW DIFFICULT THINGS WERE NEAR THE EMMER TO A GET THE PACKAGE TOGETHER AS WAS POINTED OUT BY THE COMMISSIONER WITH DIVIDED GOVERNMENT. I WOULD HOPE AS REMOVE FORWARD WE DO PROTECT THAT RESERVE ACCOUNT BECAUSE AS I POINTED OUT I WAS HERE I CHAIRED THE EDUCATION DIVISION OF APPROPRIATIONS WHEN AN APPROPRIATIONS COMMITTEE BACK AND WHERE WE HAD SIX SPECIAL SESSIONS. WE DON’T HAVE A RESERVE ACCOUNT THERE’S COST SHIFTING ECHOES ON AT THIS POINT IN TIME FOR EXAMPLE THE UNIVERSITY OF MINNESOTA HAD HAVE SOME SIGNIFICANT TUITION INCREASES AND THEY DID IT AS A ONE TIME APPROACH AS FAR RECALL CORRECTLY. THERE WAS A BURDEN SHIFTED TO STUDENTS BECAUSE THE STATE DIDN’T HAVE A RESERVE TO BACKUP WHAT THOSE OBLIGATIONS WERE. THE OTHER SYSTEMS WE DIDN’T HAVE MNSCU AT THE TIME IT DID MUCH THE SAME THING I COULD POINT TO SEVERAL SPECIAL SESSIONS WHERE WE HAD MELTDOWNS AND MORE THAN ONCE I’VE BEEN A CHAIR OF THE FISCAL COMMITTEE WHEN THAT HAPPENED. I’M NOT SAYING WHETHER THE OUTCOME OF THE 326 WAS QUARTERBACK; IT’S JUST THE RESERVE WAS USED FOR THAT PURPOSE AND REPRESENTATIVE DAVIDS WANTED TO; I THINK YOUR BALLED WITH THE ISSUE AT THE TIME?>>THANK YOU MR. CHAIR IT WAS MY BILL IT WAS A BRILLIANT WAY TO HANDLE THINGS BECAUSE WHAT THE PREMIUM SUBSIDY DID IT SAVE THE PRIVATE INSURANCE MARKET AND REDUCED PREMIUMS 25% TO. PUBLICLY THANK YOUR LIEBLING FOR RENEWING THAT THIS YEAR FOR CHAIR LIEBLING ENTERING THE BILL TO RENEW THE PREMIUM SUBSIDY IF SHE HAD NOT DONE THAT WHICH I FULLY SUPPORT IT SHE HAD NOT DONE THAT PREMIUMS WOULD OF GONE UP 50% AND THIS IS A RESULT OF OBAMA CARE DESTROYING THE PRIVATE HEALTH MARKET.>>I’M SAYING WITHOUT DEBATING THE PURPOSE I’M NOT ARGUING ABOUT THE PURPOSE BUT THE RESERVE WAS USED AT AT THAT POINT IN TIME TO ACCOMPLISH WHAT TURNED OUT TO BE A POSITIVE GOOD. JUST SAYING THAT BOTH SIDES OF THE AISLE HAVE USED THE RESERVE FOR SOMETHING OTHER THAN THE PURPOSE OF THE DOWNTURN IN THE ECONOMY AND WHAT THE RESERVE IS GENERAL THEREFORE. IF YOU’VE FILLED OUT YOUR PER DIEM SLIPS I WILL BE HERE TODAY AND TOMORROW I CAN GET THEM SIGNED AND TURNED IN. WITH THAT I WANT TO THANK THE THREE OF YOU AND WITH THAT THE MEETING IS ADJOURNED.

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