Minnesota Management and Budget, along with Governor Walz are just wrapping up the formal presentation of Minnesota’s November Budget and Economic Forecast. The links at the end of this document provide further clarity to Minnesota’s current and projected budget and potential budget surpluses.
While the topline number shows nearly $18 billion in excess revenue available in the 2024/25 biennium, most of those funds ($12 billion) will be carried forward from this biennium, which ends on June 30th, 2023. The $12 billion carryforward also represents a $5 billion increase in revenues for the current biennium. The forecast projects revenue will exceed projected expenditures in the 2024/25 biennium by $6.3 billion and $8.4 billion in the 2026/27 biennium. However, based upon state law, the forecast does not include an allowance for inflation in expenditure estimates. If inflation is included, projected surpluses will be reduced by $1.552 billion in 2024/25 and $3,309 billion in the following biennium.
The projected surplus does not include the $2.8 billion in budget reserves or $350 million in the state’s cash flow account. The forecast also shows tremendous growth in the state’s stadium reserve account, which will exceed $1 billion in 2027. Those funds are also not included in the state’s projected surplus. Those funds could be used to payoff the debt related to the construction of the Vikings stadium or diverted and used to fund other programs.
The forecast calls for a mild recession in 2023, which does result in a reduction in revenue projections for the next biennium. The forecast does suggest some caution moving forward, “Revenues are expected to exceed projected spending for the next 5-year budget horizon, but slowing growth through 2027 poses risk to the Forecast.” The forecast also hinges on the Fed’s ability to curb inflation.
Governor Walz during his remarks noted this is just a 30,000-foot view and doesn’t tell the complete story. He specifically drew attention to Minnesotan’s challenges finding daycare, higher prices for food and gas, challenges funding roads, bridges and transit and the need to fully fund education. The Governor also renewed his call for rebate checks. He left open the discussion regarding the elimination of Minnesota’s tax on social security for certain income levels.
The legislature’s new DFL Leadership joined the Governor in addressing the media. Members of the DFL leadership remained cool to the Governor’s call for rebate checks and the elimination of the tax on social security. House GOP Leadership is calling for the surplus to be returned to taxpayers and for meaningful reductions in Minnesota’s tax code. The Senate GOP has yet to release any comments regarding today’s announcements.
November 2022 Budget and Economic Forecast (mn.gov)
February 2021 Economic Forecast (mn.gov)