Forecast shows $1 billion budget surplus, down nearly $500M from previous estimate

Minnesota has a projected $1 billion budget surplus for the coming biennium (fiscal years 2020-2021), according to the February Budget and Economic Forecast released today by Minnesota Management and Budget (MMB). This amount is $492 million lower than originally forecast in November.
 
The reduction, which did not come as a surprise to those around the Capitol, is the result of lower revenue collections and a slowing economy. The lowered expectations for economic growth are driven primarily by an aging population and tight labor market that has left Minnesota employers struggling to fill open positions. The forecast projects further long-term headwinds with an estimated $11 million deficit for the 2022-23 biennium.
 
These updated numbers do not change the CGMC’s legislative priorities, and the forecast appears to have done little to change the conversation in St. Paul. Gov. Tim Walz defended the investments laid out in his proposed budget and bonding plans. Gov. Walz said the prospect of slower economic growth validates his call for $2 billion in additional spending and rejected the idea that tax cuts are needed to fix the key issues confronting the state. The Governor said he will be reviewing his budget proposal line-by-line for potential changes, but given that his budget plan leaves $782 million unspent, he will not have to make any dramatic revisions.
 
Much like the Governor, neither the House DFL or Senate Republicans hinted at dramatic changes in their approach as a result of the updated forecast. House Speaker Melissa Hortman (DFL-Brooklyn Park) reiterated the DFL’s commitment to investments in programs like paid family leave and child care funding, which she argued can help ease the state’s labor shortage by moving Minnesotans currently not participating in the labor force off the sidelines as well as attract more workers to the state. Senate Majority Leader Paul Gazelka (R-Nisswa) released a statement saying that the budget forecast underscores the need to reject tax increases and permanent spending commitments, which mirrors what GOP lawmakers said after Gov. Walz released his budget last week.
 
You can find all the details on the February Forecast on MMB’s website.