March 7, 2018
Minnesota Budget Forecast
Good News for Minnesota Budget—On Wednesday, February 28, Minnesota Management and Budget released the February Forecast, which is the forecast that the current biennium spending bills must be balanced. The forecast stated that Minnesota’s budget and economic outlook has improved since November.
A surplus of $329 million is now projected for the FY 2018-19 biennium. The revenue forecast for the biennium is up $353 million compared to November estimates. Higher forecasts for all the major tax types contribute to the change. This forecast reflects increased U.S economic growth arising in part from short term stimulus from federal tax law changes. After accounting for recently enacted legislative budget appropriations, spending for the biennium is projected to be $167 million lower than November estimates. Federal reauthorization of appropriations for the Children’s Health Insurance Program (CHIP) is the most significant driver of the lower overall expenditure forecast.
The improved budget outlook continues into the FY 2020-21 planning estimates with modest structural balance projected for that biennium.
Looking ahead, the budget projection expects consumer spending to remain the primary contributor to growth in the economy, even as the pace of spending eventually slows. In the short term, consumer spending is well-supported by rising employment, disposable income, and household wealth, with an additional boost to income and spending from lower tax rates under the TCJA. In this forecast, real consumer spending is expected to grow 2.9 percent in 2018 compared to 2.5 percent projected in the November forecast.
The improved forecast continues into 2019, with projected growth at 2.4 percent relative to the 2.2 percent projection in the November forecast. However, IHS expects a slowdown in real consumer spending in the years of our planning estimates. Spending growth is forecast to decelerate from 2.4 percent in 2019 to 2.1 percent in both 2020 and 2021. This occurs as consumers shift their focus from spending to saving. In IHS’ outlook the personal saving rate rises from 3.6 percent in 2018 to 4.8 percent in 2018 and stays above 5.0 percent through our forecast horizon.
Per House Rule 4.03, the Ways & Means Committee must adopt a budget resolution within 25 days of this forecast release. The committee deadlines are as follows:
Thursday March 22th — First committee deadline to act favorably on policy bills in the house of origin.
Thursday March 29th – Second committee deadline to act favorably on bills, or companion bills, that met the first deadline in the other house.
Friday April 20th – Third deadline for committees to act favorably on major appropriation and finance bills.
The end of regular session will be no later than Monday, May 21st.