On Feb. 26, Minnesota Management and Budget (MMB) released the February budget and economic forecast, which conveys an improved outlook for the state’s budget despite the ongoing COVID-19 pandemic. The forecast shows an improvement from a $636 million surplus (as projected in the November 2020 forecast) to a $940 million surplus in the current biennium. For the 2022-23 biennium, the new forecast shows an even greater improvement over the November forecast — from a $1.3 billion deficit to a $1.6 billion surplus.
While positive, there are some caveats to keep in mind. First, much of the improvement is attributed to two federal stimulus relief bills, one in December 2020 and the anticipated federal stimulus this year. The state’s budget outlook could change significantly if there is some hiccup in passing or a major reduction in the amount of the next federal stimulus. Second, much of the surplus for the next budget cycle is attributable to the carryover of this biennium’s $940 million surplus. This makes it basically “one-time” money and should not be built into any ongoing assumptions about the state budget situation beyond the next biennium.
As could be expected, Democrats and Republicans had significantly different takes on what the February forecast means for the budget discussion currently underway at the Capitol. Gov. Walz and DFL legislators have made clear they are going to continue to press the Governor’s plan to increase taxes to provide for increased spending in several areas of the budget. Republicans, against any tax increase even before the forecast, are adamant that any tax increase is unwarranted due to the better budget outlook.
Even prior to the release of this new forecast, CGMC was pushing for a number of critical investments in child care, housing, and infrastructure. A positive budget forecast means the state is able to spend some money this session, and we will continue to work to ensure that Greater Minnesota’s needs are taken care of.
