March 2, 2022
February Economic Forecast
Earlier today, Governor Walz and the leadership of the Minnesota Office of Management and Budget formally released the February Economic Forecast. The forecast will provide the Walz Administration and the Minnesota Legislature with the fiscal roadmap necessary to design a supplemental budget, bonding bill and potentially some form of tax relief. The good news, since the November Forecast Minnesota’s budget surplus has continued to grow. Over the past few months, Minnesota has added an additional $1.5 billion dollars to the state’s surplus. This is on top of the billions of dollars the state has put away into budget reserves, stadium reserves and rainy-day funds. This also does not include the roughly $1.2 billion in unspent federal COVID funds the Legislature and Governor left unspent at the end of the 2021 Legislative Session. This means, there is roughly $10.4 billion dollars (20% of the state’s biennial budget) available for the Legislature and Walz Administration to divvy up in the coming weeks.
The economist who prepared the report did raise a few concerns with the projections. Given the timing of the Russian invasion of Ukraine, the wars impact on energy pricing and other commodities was not factored into the report. Economist also pointed out Minnesota law prohibits the factoring of inflation into government spending, the forecast therefore does not account for approximately $1.1 billion in inflationary costs. Cautionary concerns aside, the state continues to be flush in cash and the ongoing projections show a structural surplus of more than $6 billion for fiscal years ’24 and ’25.
The real fight began today, GOP members of the Legislature are calling for ongoing, long-term tax relief. The Senate GOP Majority is calling for a dramatic reduction in the lowest income tax tier and the elimination of the income tax on social security benefits. Their proposal would move the lowest rate from 5.35% to 2.8%. The GOP proposal would leave untouched Minnesota’s three remaining income tax brackets. Governor Walz today raised the ante on his proposed Walz Checks, suggesting $500 per individual and $1,000 per couple. His plan calls for checks being issued in early summer. The House and Senate DFL voiced a more cautious approach and suggested it may be best to protect against future financial storms by putting more money into Minnesota’s Budget Reserves.
The following link will take you to the MMB February Economic Forecast Presentation:
Special Election – First Congressional District
starts the two-week filing period for candidates looking to run in the August Special election, to fill the First Congressional District seat left open with the recent passing of Congressman Hagedorn. The Special Election will be held on August 8th
, which is also the date of Minnesota’s Primary Election Day. The winner of the Special Election will complete the remainder of Congressman Hagedorn’s 2020 term. In November, a new member of Congress will be elected in a First Congressional District, with district lines that vary from the August Special Election.
New Legislative District Maps
While public policy has been the primary focus of the session, the recent announcement of the newly drawn Congressional and Legislative maps by the Minnesota Courts has been a big distraction. In the Minnesota Senate, which has sixty-seven members, twenty members of the Legislature found themselves paired with another member of the Senate. The new Senate maps have brought about some significant announcements of retirements by members of the Senate. Those announcements include, Senator Julie Rosen, Chair of the Senate Finance Committee, Senator Melisa Lopez-Franzen, the newly minted Senate Minority Leader, Senator Scott Newman, Chair of the Senate Transportation Committee and Senate President David Osmek. More announcements are likely in the coming days.
The House was not spared drama from their own maps. There are 134 members of the Minnesota House, at this point forty members of the House are paired with another member. House members have been slower in announcing their retirements. Most announcements by House members, have been announcements of campaigns for open seats in the Minnesota Senate. The fallout from re-districting will linger for the next few weeks.