On Monday, the House Ways and Means Committee held a virtual meeting that focused on a presentation from Minnesota Management and Budget (MMB) Commissioner Myron Frans and State Economist Laura Kalambokidis on the quarterly economic outlook that came out April 10, as well as an update on the COVID-19 federal funding.
The economic outlook is provided each quarter; however, it does not provide a full picture of the revenue impacts. Kalambokidis said that the delay in the 2019 income tax deadline to July 15 makes it harder to fully understand the revenue impacts to the state. The outlook reported that the Minnesota net general fund receipts during February and March were $103 million (3.8%) less than projected in the February outlook. This shortfall reflects the beginning of a drop in revenues. Net individual income tax receipts during February and March were $101 million (9%) less than the forecast, and net sales tax receipts were $14 million (1.7%) below the forecast.
In addition, MMB has been tasked with producing an updated budget projection for Minnesota that will come out in the first part of May, before the Legislature adjourns, to give legislators a better picture of the state budget.
The U.S. economic outlook has dramatically weakened since the February forecast, with a 5.4% reduction in real GDP projected for 2020. Minnesota’s macroeconomic consulting firm predicts the nationwide spread of the coronavirus to peak and then dissipate in the middle of this year. They then predict social distancing could be lifted and national economic recovery beginning in the third quarter, and fourth quarter a GDP increase. A 3.6% GDP growth is forecast for 2021.
MMB expects to receive guidance in the next two weeks on the federal funding from the CARES Act. An outline of where the funding will be distributed was provided to the committee. It is still unknown how the state of Minnesota plans to distribute its funding.