ST. PAUL – Minnesota Management & Budget on Tuesday issued a budget forecast which calls for a $641 million state revenue surplus through June 30, reversing a previously projected $2.4 billion shortfall. A $1.3 billion shortfall for the 2022-23 biennium also marks a significant improvement from earlier predictions.
“This relatively positive report on our state’s economy is something of a surprise and it just goes to illustrate the uncertain times we are in amid this pandemic,” said Rep. Bud Nornes, R-Fergus Falls. “Last winter, our state was on track for a nice, healthy surplus and then, seemingly out of nowhere, it looked like Covid-19 was going to cause the bottom to fall out of our economy. That hasn’t proved to be the case and now the hill for the new Legislature to climb as it sets a new state budget in 2021 does not appear to be as steep as once feared. In fact, there is enough money in reserves to cover the remaining shortfall in the next biennium, so that should tamp down any talk of raising taxes to make ends meet.”
Nornes said a combination of reduced state spending and a less-than-expected dip in income-tax revenue played major roles in mitigating the economic downturn. For example, a $919 million drop in Health and Human Services spending resulted from lower-than-expected Medical Assistance utilization. And a $118 million reduction in E-12 education spending came as many parents sought alternative educational options for their children or delayed sending them to kindergarten.
While this forecast provides a rough framework of figures, an updated February report will set the official numbers from which the Legislature will construct a new state budget.
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