Minnesota's $17.5 billion budget surplus remains largely unchanged from previous estimates
ST. PAUL, Minn. -- Minnesota Management and Budget officials announced Monday that the state has a $17.5 billion budget surplus, a balance that remains largely unchanged from the November outlook.
"The key takeaway for today's budget forecast is that the economy is stable and the budget outlook is very good," said Minnesota Management and Budget Commissioner Jim Schowalter.
November's forecast anticipated a projected balance of $17.6 billion, but state tax revenues since that estimate have continued to increase. The difference is that for the first time in two decades, this estimate includes the impact of inflation on spending projections, which takes a $1.4 billion bite out of that top line surplus number.
This forecast also includes some spending lawmakers have already accounted for earlier this session. Most of the surplus consists of one-time money that cannot be used for long-term investments.
"Underneath all the forecast and all the projections is a solid economic outlook with continued growth in the economy, slightly lower inflation and a slightly milder recession that previously anticipated," said Schowalter.
On an ongoing basis, the state's chief financial officer anticipates revenues to exceed spending.
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The state legislature will craft the next two-year budget for fiscal years 2024 and 2025 based on the spending and revenue estimates detailed in this report. Ongoing revenues plus the surplus means $72 billion are at play.
Democrats in charge of the Capitol praised the forecast as a positive sign for Minnesota's economy and an opportunity to pass priorities they believe will tackle the state's challenged. But they also vowed "responsible" budgeting.
"This year we have an opportunity to address two decades of underfunding in people and communities, and most particularly in education," said House Speaker Melissa Hortman, DFL-Brooklyn Park.
Meanwhile Republicans point to the surplus as a sign Minnesota is overtaxing its residents. They are rolling out a tax relief plan Tuesday, though passing it will face hurdles in both chambers with DFL-majorities.
"If we can get money back to Minnesotans in ways that really improve and affect their lives -- that's what Republicans are after," said Sen. Minority Leader Mark Johnson, R-East Grand Forks.
Inflation impact on the forecast
A 2002 law repealed a requirement that the rate of inflation be included when calculating state spending, or the cost of government programs and services.
Earlier this year, lawmakers approved a bill to add it back into those projections, which Democrats say provides a more accurate picture of the state's finances.
"I'm very pleased that we're finally implementing inflation in our forecast again on both sides of the ledger," Hortman said. "Minnesotans deserve honesty in our budget process, and that was a very important change that we passed earlier this session."
Schowalter also endorsed the change.
Click here to view state budget documents.