Understanding the Minnesota miracle

Christmas has come early in Minnesota.

Minnesota Gov. Mark Dayton (David Joles - AP) After an intense battle over government spending shut down its government for 20 days this summer, the state now is forecasting an $876 million surplus over the next two years. That’s a huge surprise compared to the $5 billion projected deficit that Minnesota expected in July, setting off a national, highly-partisan battle over the best way to close that gap.

What changed? State officials chalk a lot of the good news up to factors specific to Minnesota. The state has seen its revenue increase as its unemployment rate is lower than the national average. The state has, for example, regained about a third of the jobs lost since the recession began. Nationally, that number stands at 22 percent.

Minnesota has also cut its spending, particularly on health care, in unique ways. It’s one of just four states, for example, to expand its Medicaid program in advance of the health reform law’s required expansion. For doing so, it’s received a higher Medicaid matching rate for some patients from the federal government.

“We are outperforming the U.S. economy and expect to continue doing that,” Tom Stinson, Minnesota state economist, told reporters at a news briefing this afternoon.

But this isn’t exactly a Minnesota miracle: Most states are expecting a rosier financial outlook in the coming year. The state’s news could well be a harbinger of things to come from other states. Two big reports, just within the past week, find state budget pressures to have lessened in the past year.

In a report today, the National Conference of State Legislatures finds that state revenues are “stabilized or are growing” across the country, with an average 1.9 percent increase in state revenue expected in 2012. Only four states have seen a budget shortfall since this fiscal year began, compared to 15 states at the same point in 2010.

This echoes the findings of a report from the National Governor’s Association, which saw 43 states with higher general fund spending in 2011 than 2012. State revenue increased by a cumulative $10 billion, although still remain below 2008 income levels. With numbers like these, Minnesota may soon be joined by other states announcing good budget news.