Minnesota Struggling with Cash Flow Problems

Minnesota, like most states, is experiencing a cash flow problem. The state’s cash balance is expected to drop below $500 million in December, which is low considering a $31 billion budget. Revenue collected by the state is $233 million less than was forecast in February.

According to Revenue Commissioner Ward Einess, the cash flow imbalance has prompted a delay in corporate tax refunds of $128 million to 451 businesses and sales tax refunds of $16 million to 294 taxpayers. The delayed refunds will be paid by December to avoid paying interest on refunds that are more than 90 days past due.

State officials say that the state may need to borrow funds for its day-to-day operations, but this may not be necessary until spring. Borrowing for operating expenses could jeopardize the state’s credit rating requiring higher interest rates on bonds for construction projects. Management and Budget Assistant Commissioner Kathy Kardell reported to a legislative subcommittee on November 12, 2009 that the borrowing could be achieved by issuing certificates through competitive bidding, negotiating a line of credit with a bank, or selling certificates to the State Board of Investment.

Minnesota last borrowed for operating expenses in the early 1980’s.