December 2, 2020

Update Forecast Released

Governor Walz and members of his finance team at the Office of Management and Budget provided further details on the November 2020 Budget & Economic Forecast on December 2.  Last May, a preliminary forecast projected the state would be facing a $2.4 billion deficit in the current biennium which ends on June 30, 2021 and a $4.7 billion shortfall in the next biennium as a result of the coronavirus.

 Yesterday’s forecast indicates Minnesotans have been spending heavily on taxable goods, well beyond what had been projected in May when the Governor’s Emergency Executive Order had shuttered many Minnesota businesses.  The increased revenues do not include spending on medical devices or automobiles.  In March, prior to COVID, for the current biennium the state had a projected $1.5 billion surplus, May projections indicated a potential $2.426 billion deficit and today’s projections indicate a $641 million surplus.  The surplus in the current biennium also takes into account $1.053 billion less in state spending and does not include any federal funds the state received from the CARES Act.  

Yesterday’s forecast also shows great improvement in the next biennium where the projected deficit shrinks from $4.7 billion to $1.27 billion.  However, the forecast only takes into account the Governor’s latest shutdown lasting until mid-December, something the Governor indicated today is likely to be extended into the new year.  The forecast does not take into consideration any inflationary factors related to spending, if inflation is added to the projected spending the deficit for 2022-2023 rises to $2.919 billion and reaches $3.467 billion for the 2024-2025 budget.    

The state general fund continues to maintain $2.377 billion in budget reserves, $350 million in the cash flow account and $81 million in the U.S. Bank Stadium Reserves.  Because the forecast only reports on general fund spending, any remaining CARES Act funds or other non-general fund reserves are not included in the forecast.  However, those funds will be identified in the Consolidated Funds Statement released later this week. The state and their economic advisors are anticipating the state will be well into the vaccination process by the start of the second quarter, and for the Governor’s Emergency Executive Orders to continue through June of 2021 to allow the state to continue receiving certain federal matching funds.  MMB Commissioner, Jim Schowalter has indicated, given the uncertainties related to the pandemic, we should expect forecasts to be much less reliable than in previous years.  He also noted this report does not take into account any additional relief coming from the federal government.  

Following the formal presentation, Governor Walz made comments and took questions from the media.  Most questions were related to negotiations currently taking place between members of the Legislature and his administration on an emergency relief package for Minnesota employers and employees.  He indicated support for a package ranging from $300 – $600 million, targeted towards bars, restaurants and gyms which have been most impacted by his recent shutdown.  The current shutdowns were announced just prior to the Thanksgiving Holiday.  The Governor felt the budget announcement and the existence of a surplus should help those discussions move forward quickly.  He has indicated a willingness to call the Legislature back as soon as this week to adopt a relief package.  The Legislature will also return at some point in mid-December to consider yet another extension of the Governor’s Emergency Executive Order.  

The current shutdown is scheduled to remain in place through December 18th.  When pressed regarding an extension of his current order, the Governor indicated he is not leaning one way or the other, but he doesn’t see the current numbers improving much in the next few weeks.  His response also indicated the need for similar restrictions through the upcoming holidays to try and manage the spread of the pandemic.  It appears highly likely the current order will be extended until some time in January.  The Governor also discussed the need to look for ways to address challenges the pandemic has put into the education system, even suggesting he would consider keeping kids in school throughout the summer in an effort for students to catch up on lost time in the classroom.  House and Senate Leaders also provided comments regarding the budget announcement.  DFL Legislators were quick to point out the need to include inflation in the forecast and the impact that has on the deficit in the out years.  DFL Leaders also indicated their budget proposals in the upcoming session will provide economic relief to those hardest hit by the pandemic, they were also hopeful an agreement can be reached quickly on an immediate relief package. 

House GOP Leaders also provided comments on the budget, however the bulk of their attention was directed towards the current efforts to pass a small business relief bill.  They were quick to point out their proposal was the first to be brought forward, and their belief a bill needs to include targeted relief to businesses most impacted by the Governor’s shutdowns.  It became apparent throughout today’s press events the Walz/DFL proposal is to send a similar amount to every business impacted by the Executive Order.  The GOP plan appears to be similar to a request by Hospitality Minnesota to create a program that directs relief to businesses based upon their actual losses.  The final agreement may also include deferrals on sales tax payments, an expansion of the Capitol Equipment Sales Tax Refund Program to restaurant equipment and an ability for restaurants to receive tax relief for donated food.  

The following link will take you to the Minnesota Management and Budget webpage which includes numerous documents related to the forecast Budget and Economic Forecast / Minnesota Management and Budget (MMB) ( 

In addition to the financial news, over the past few days both House and Senate Leadership have announced their committee structures and chairs.  The 2021-2022 Session will bring a number of new faces into positions of leadership and chairs of powerful committees.  In the House, Rep. Rena Moran (DFL-St. Paul) will take over as Chair of the powerful Ways and Means Committee. Moran replaces Rep. Lyndon Carlson (DFL-Crystal) who is retiring after 48 years in the Minnesota House.  Moran currently serves as Chair of the House Health & Human Services Policy Committee, is co-Chair of the House Select Committee on Racial Justice and Chairs the People of Color and Indigenous Caucus.  Other chairs of note, second term Rep. Zack Stephenson (DFL-Coon Rapids) takes the helm of the House Commerce Policy & Finance Committee and second term Rep. Jamie Long (DFL-Minneapolis) will chair the House Climate and Energy Policy Committee.  The following link will take you to the list of 30 House Committees and Chairs. 

Rep. Melissa Hortman – Minnesota House DFL Majority announces committee structure and chairs ( 

In the Minnesota Senate, former DFL Senators Tom Bakk (I-Cook) and David Tomassoni (I-Chisholm) were rewarded for their decisions to leave the Senate DFL Caucus.  Bakk will chair the Senate Bonding Committee and Tomassoni will take over the Senate Higher Education & Policy Committee.  Sen. Carla Nelson (R-Rochester) and Sen. Roger Chamberlain (R-Lino Lakes) have agreed to swap committees for the 2021-2022 Session.  Chamberlain will become Chair of the Senate Education Finance & Policy Committee and Nelson takes the helm of the Senate Tax Committee. Sen. Senjem, (R-Rochester) will now chair the Senate Energy Finance & Policy Committee.  Senjem has been working for some time to pass a Clean Energy First bill through the Minnesota Senate, with his focus no longer on Chairing the Bonding Committee and now managing the Energy Committee, his likelihood of success has certainly improved.  The document attached to this email includes the list of Senate Committees and Chairs.