February 1, 2021

Projected Budget Surplus

Minnesota’s budget outlook is significantly better for this biennium and the next due to an improved U.S. economic outlook that is bolstered by large federal actions that have emerged since November and were not incorporated in earlier projections.  There is no longer an anticipated shortfall for FY 2022-23 and we now project a positive balance of $1.6 billion because of a higher revenue forecast, lower state spending, and an increased surplus for the current fiscal year. Improvements to the economic outlook have not been spread equally as unemployment continues to disproportionately impact lower-wage workers.”

Last November MMB, as part of their November 2020 Budget and Economic Forecast, projected a $1.273 billion budget deficit for the next biennium.  Today’s announcement suggests a nearly $2.8 billion improvement to the state’s budget and revenues since November.  It is important to note, the November Forecast did not include any recognition of the $900 billion in federal COVID-19 relief passed by Congress and signed into law in December.  The Legislature and Governor Walz will use the February Budget and Economic Forecast as the basis of their negotiations to complete the budget for the next biennium.
The February Forecast does not contemplate any additional federal support.  If the Biden Administration and Congress are able to pass the nearly $1.9 billion COVID-19 package, currently being negotiated, the state’s budget surplus and economic forecast is likely to show further improvement.  However, given the timing of those negotiations, any additional federal funding cannot be contemplated in the state’s budget for the next biennium.  The budget for the next biennium could address this issue by establishing spending which would only take place if additional federal support is made available to the state.