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Rebecca Otto: Get the politics out of budget forecasting

Minnesotans no longer get a straightforward assessment of the state's financial baseline.

Rebecca Otto
Published: June 05, 2007

As Minnesota's state auditor, I feel it's my responsibility to weigh in on the debate about whether or not to include inflation in the state budget forecast, which the governor cited as the cause of his veto of the tax bill.

Minnesota has performed very well over the years because we lived by a guiding principle regardless of which party was in control. That principle was that we allowed fiscal experts to create a budget forecast that gave a straightforward, honest picture of our state finances. This gave us as a baseline a snapshot of where we were headed if nothing changed. Then the governor, the House and the Senate would each craft their own budgets using that snapshot as the starting point. These budgets reflected their particular priorities -- for example, some areas might get inflationary increases, while others were cut back or eliminated.

The beauty of this system was that it allowed the fiscal experts to give Minnesotans, lawmakers and the media an honest assessment of our financial picture. Politicians did not intrude in their work, and did not attempt to create spin one way or another about this starting point. They could craft their budgets with spin, and impart politics there. At the end of the day, they had to come together and find compromise.

Today, and throughout the time of the current administration, we have allowed politics to enter into the forecasting process. We no longer get a straightforward assessment of our financial baseline. We include inflation in forecasting for revenues but not expenditures. This tends to create a rosier picture than our real financial condition. The federal government does not do this. I do not know of other states doing this, and I know that business does not do this, either.

The claim that this puts government on automatic pilot spending is false. Because elected officials always retain final say over spending priorities, no budget is automatic. Informed budget decisions must be made every year, and those decisions should be based on accurate baseline forecasts. Had inflation been included in expenditures in our forecast in 2003 when we faced our $4.5 billion deficit, our deficit would have been larger. Is this uncomfortable for politicians? Yes, but citizens deserve to hear the truth from the fiscal experts first, and should expect nothing less.

Our office works to ensure prudent fiscal management within local governments. The state of Minnesota should also exercise prudent fiscal management. It needs to get the politics out of the forecasting process. After the forecast is issued, then they can set their budget priorities, battle it out, and set the direction for the state.

Rebecca Otto is in her fist year as Minnesota state auditor.