Latest Minnesota budget forecast shows $17.6B surplus
Minnesota’s latest budget and economic forecast was announced Tuesday morning, showing a massive $17.6 billion surplus for the state.
Tuesday’s projection is up from the forecast $9.253 billion surplus back in February.
Minnesota’s Management and Budget commissioner and state economists discussed the latest forecast Tuesday, as did Gov. Tim Walz and state lawmakers.
State Economist Dr. Laura Kalambokidis noted the “dramatic changes” since February’s forecast — Russia’s invasion of Ukraine, the spike in inflation and the actions taken by the Federal Reserve to try to combat inflation — but said the state’s lower-than-expected spending and higher-than-expected tax collections led to the increase in the forecast.
However, it is important to note that the forecasts don’t take into account the impact of inflation, which was still measured at 7.7% in October.
Minnesota Management and Budget Commissioner Jim Schowalter said the projection would look “much different” and smaller if inflation was factored into the forecast.
“It’s an important consideration, we need to talk about it,” Schowalter said of inflation, noting the many financial problems inflation has caused. However, he declined to say whether or not he believes lawmakers should change the law to allow inflation to be factored into these budget forecasts. Walz later said he believes inflation needs to be factored in because the forecasts can otherwise mislead the public.
Additionally, Schowalter noted that only around $6 billion of the state’s projected surplus comes from funds that are recurring each year — although that’s projected to grow to $8 billion by the end of the next biennium — and the rest comes from one-time actions.
Still, even factoring in a mild recession Kalambokidis said is expected to last until late next year, the state’s financial position is very strong.
After a deal for how to use some of the massive projected surplus fell apart at the end of this year’s legislative session and the DFL now set to control both chambers of the Minnesota Legislature and the governor’s office, Gov. Tim Walz and DFL leaders will have greater say over how to potentially use the surplus. In the past, Walz has said he’s supported sending checks to each taxpayer while Republicans had pushed for permanent tax cuts.
Tuesday, Walz said he’ll again propose sending direct checks to Minnesotans but noted lawmakers on both sides of the aisle weren’t too keen on the idea during the last session so they’ll have to see what lawmakers think next year. However, the governor made clear that he has big expectations for the legislature next year.
“Today’s news is proof that Minnesota’s economy is strong and growing. One thing is clear: this surplus is a result of the students, small businesses, and working families whose hard work and creativity make our economy one of the most resilient and diverse in the country,” Walz said. “The case for sending money back to Minnesotans to help with rising costs has never been stronger. Together, we have a golden opportunity to do that while also investing in our workforce, our schools, and our kids – all while lowering costs for our middle-class families, small businesses, and seniors.”
Watch Tuesday’s press conferences on the budget forecast below.
Tuesday morning, state Republican leaders issued the following statements on the record budget surplus:
“Minnesotans are being massively overtaxed, and we should spend most of the next session working to give as much of it back to Minnesotans as possible. Tax hikes of any kind should be a complete non-starter. Families deserve their money back as they continue to deal with the high cost of groceries, home heating bills, and other everyday necessities. Republicans are ready to roll up our sleeves and work with the majorities in the House and Senate to deliver the tax cuts that were promised to Minnesotans, law enforcement funding for to help our communities strengthen public safety, and more.”Rep. Lisa Demuth (R-Cold Spring), House Minority Leader
“This surplus continues to show that the government is doing well – we have another hefty surplus and a brimming budget reserve. This is the moment policymakers must step up to put the needs of Minnesotans first. We are being battered with high property taxes, rapid inflation, rising energy costs, and a looming recession. We need real relief that all Minnesotans can count on for years to come.
What we don’t need is this Democrat-controlled government to create massive increases in government spending – guaranteeing higher taxes for Minnesota’s families and businesses. The last time Democrats had single-party control, we saw a plethora of new government programs requiring billions in permanent tax and fee increases. We simply can’t afford to see government grow faster than our paychecks. Senate Republicans are committed to fighting for the pocketbooks of Minnesotans across the state.”Sen. Mark Johnson (R-East Grand Forks), Senate Minority Leader
“This projected budget surplus is great news for Minnesota. Our state is in a strong position to take decisive action to solve big challenges. A workforce shortage is constraining our economic growth, making it even more important that we focus on things that help Minnesotans enter and stay in the workforce — like job training, education, child care assistance, paid family leave, and more. It is also a time to roll out the welcome mat for people who choose to move to Minnesota and expand our workforce. House DFLers are ready to get to work in January and we look forward to a productive session.”Speaker of the House Melissa Hortman (DFL-Brooklyn Park)
“Today’s budget forecast puts Minnesota in an incredibly strong position to accomplish many important things for our state in the coming legislative session. Minnesotans put us in the majority because they are tired of gridlock and inaction, especially at a time that there are real needs for families and communities across our state. Now, we will use the tremendous opportunity to boldly get things done to help struggling working Minnesotans afford their lives, keep our communities safe, our schools strong, and take action on climate.
“With this projected surplus, Senate DFLers are ready to get to work in January on behalf of Minnesotans. We’re ready to tackle the challenges facing kids, families, workers, seniors, and communities, and we promise to pass a budget that is strategic and bold. In the coming weeks, the Senate DFL Caucus will be discussing priorities and getting to work for Minnesotans. We are ready to lead.”Senate Majority Leader Kari Dziedzic (DFL-Minneapolis)