Will Minnesota’s $17.6 billion surplus shrink or grow? Latest estimates due Monday – Twin Cities
Minnesotans will get an updated look at the state’s financial picture Monday when budget officials release the latest financial forecast and economic outlook.
It’s an important report for lawmakers in the House and Senate, who will soon focus on preparing the state’s next biennium. Current general fund spending is $51.7 billion and that is expected to grow to nearly $54 billion before one of Democrats’ ambitious plans is added.
In December, Minnesota Management and Budget executives announced a historic budget surplus of $17.6 billion. They also warned that the state faces economic headwinds and the possibility of a national recession.
Tax revenue has continued to beat expectations since the December announcement, with year-to-date revenue of about $487 million, or nearly $3 million above expectations.
That forecast will be different because, for the first time in 20 years, it will include estimates of how much inflation will affect current government costs. Members of the Democratic-Farmers-Labor Party recently passed legislation, against objections from most Republicans, that includes inflation on both the revenue and expenditure side of the forecast.
State officials previously estimated inflation costs could add about $1.5 billion to the next budget if lawmakers don’t change. The move may provide a more accurate estimate of running costs, but it also means less money will be available when negotiating the next state budget.
In January, Gov. Tim Walz laid out a broad agenda that would use much of the budget surplus, with more than $11 billion in new spending and over $5.4 billion in tax refunds and credits. The DFL people have a tight grip on both chambers of the legislature, so Walz is likely to get a lot of what he wants.
The Democratic governor has yet to negotiate with leaders in the House and Senate, who have their own ideas about how the state should spend money. Republicans also hope to influence those spending plans by pushing for permanent tax cuts and more modest spending increases.
The new DFL trifecta quickly shifted to forecasts, but so far those signed by Walz have had little impact on the projected surplus. In line with the federal tax changes, unemployment benefits for miners and more staff for the attorney general will cost about $110 million in the upcoming budget.
The next state budget is due before the legislature adjourns at the end of May.