The novel coronavirus pandemic is having a significant effect on Minnesotans' physical and mental health of Minnesotans. Unprecedented businesses closures and job losses as a result of the pandemic are having real impacts on Minnesotans and their pocketbooks. Those financial implications will also echo in the state government’s financial health.
We’ve started to see evidence of this impact trickling in, as we reported on the state’s April economic update, but the magnitude of the impact to state finances has also inspired another unprecedented step: a new state budget projection expected to come the week of May 4. The economic data from the April quarterly update will be used as the working scenario to produce the May report.
This projection will inform the crucial work of state policymakers to ensure that Minnesotans have the health care and economic supports they need to get by, and to lay the groundwork for a stronger Minnesota when we come through the other side.
A May budget projection is a new step in the long-established schedule of state forecasts and economic updates. It will not be a full state budget forecast like we typically see in November and February. Minnesota Management and Budget (MMB) will also continue releasing their other regularly-scheduled reports, like end-of-session fund balances, quarterly economic updates, and monthly revenue memos.
Since this is a new tool, we are not exactly sure what it’ll look like – but here’s what we’re hearing:
- The projection will be for the current FY 2020-21 biennium only. Typically, state budget forecasts include a peek into the future biennium, but uncertainty is too high for that type of estimation right now.
- The data available to make the projection are much more uncertain than the state normally uses. The state’s economic forecasters give less than a 50 percent chance that the economic scenario that will underlie the projections is correct, and timing delays mean the revenue data the state has to work with has less predictive power than usual.
- The projection will cover the state’s general fund, Health Care Access Fund (HCAF), legacy, and transportation funds.
- It may include some information on the important federal funds that are coming to the state for COVID response, health care, child care, and other essential state services. However, federal funds don’t go into the state’s general fund - so they aren’t part of the calculations for the most commonly-heard state budget figure, the balance in the general fund.
- The projections will include updated information on forecasted services in the Department of Human Services; “forecasted” programs are those that by law automatically change in response to things like the number of people who qualify for services.
- Revenue updates will focus on the largest state revenue streams, the revenue streams most sensitive to economic downturns, and/or where experts have good data to make new estimates. We have heard this will include income, sales, corporate, alcohol, lawful gambling, and transportation taxes.
Keep an eye on our blog and social media channels for continued updates as we work through this tumultuous time.