A wise fellow with good knowledge of state budgeting policy reminded me today that the government can pass a bond for capital projects but not for ordinary spending. Thus, any tapping of cash for project spending in the special session tonight (tomorrow?) would be money that has to be replaced with taxes or reduced government spending next February, if the forecast comes out badly.

This is why the quote that Michael has highlighted of Larry Pogemiller seems so odd. Surely the DFL knows what I just said; if there's a shortfall, that would pretty much guarantee a tax bill next spring. Once that engine is in the train station, there will be a lot of cars trying to get put on the train. They should be happy he got at least $75 to $80 million out of the surplus; I won't fault Pawlenty too much for giving that little bit to Pogie, but it might come back to haunt. Meanwhile,

Side note: I'm wondering about this data that Drew has posted on an extra $20 million in tax revenues for July and August. (It was down in July; I can't source the August data yet.) August is when taxpayers who took extensions on filing had to get their returns in. Note that almost all the excess tax revenue came in the individual income tax. It's possible that this blip is larger-than-expected payments in those August filings of 2006 returns and would not tell us anything about 2007. That's pure speculation on my part, though, as I have before.

Labels: economics, legislature, Minnesota