Nelson: Including inflation in the budget forecast is misguided

“Using inflationary data to calculate revenues and spending would be like adding inflationary costs to how much you owe in taxes; we would never do that to Minnesotans, and we shouldn’t do it to state budget data either.” Sen. Carla Nelson

(St. Paul) — Minnesota State Senator Carla Nelson (R-Rochester) today opposed SF-46, a bill that would require inflation figures to be calculated in Minnesota state revenue and spending forecasts.

“My main concern is that it could be used to put government spending on autopilot growth,” Nelson said. “As legislators, we were sent here to make tough calls about our state budget. We listen to our constituents, prioritize their needs, and answer for our decisions. If we bake inflationary data into state spending, it will take crucial decisions out of the hands of elected officials with little opportunity for the public to receive any accountability.

“As the former chair of the Senate Tax Committee, I believe in being responsible and effective with taxpayer dollars,” Nelson added. “Calculating spending and revenue forecasts using inflation is neither. Using inflationary data to calculate revenues and spending would be like adding inflationary costs to how much you owe in taxes; we would never do that to Minnesotans, and we shouldn’t do it to state budget data either.”

“Inflationary data is not hidden; it is noted in every revenue forecast in plain sight for the public and interested parties to read,” Nelson concluded. “It is important to know what those numbers are, but the purpose of a forecast is to look at current laws, current revenues, and current spending to make sure they line up. We should not use inflationary data to put government spending on autopilot.”

Senate File 46 explicitly allows MMB to use an inflationary number to adjust all agency area budgets into new spending targets. This means that whenever there is inflation, state budgets will automatically add inflation to bottom-line spending requests, even though inflationary spending is not a legally authorized appropriation.

The bill would require Minnesota Management & Budget to include inflation when determining the state’s future expenditures within state agency budgets, but it does not specify which inflationary indicator would be used.