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State budget process kicks off amid unusual uncertainty

Betsy Hammer
Oct 01, 2020

Fresh pencils for back to school, shorter days, bright red maples – these are a few of the classic harbingers of fall. Here at the Minnesota Budget Project, we observe another: instructions to state agencies as the executive branch starts the process of preparing the governor's budget proposal. 

The process to prepare Governor Tim Walz's FY 2022-23 Minnesota state budget proposal is especially challenging for many reasons. First, the state is facing budget shortfalls as a result of the pandemic and economic downturn: $2.4 billion for the current FY 2020-21 biennium and $4.7 billion in FY 2022-23. Legally, Walz is required to prepare a proposal that brings the state budget back into balance. (More about how we encourage advocates to think about the state’s budget debate in a moment.) 

Further, the budget landscape for FY 2022-23 will be impacted by decisions the administration makes about addressing the FY 2020-21 budget shortfall – for example, whether it is largely resolved by drawing on the budget reserve, and any other steps they may take to respond to the ongoing coronavirus pandemic. 

In addition, there’s a great deal of uncertainty that will shape the landscape, including: 

  • Will the state get additional COVID-19 relief funding from the federal government? If we do, when will it come and what could it cover? Though it was anticipated that the federal government would have by now provided additional COVID-19 relief and economic stimulus legislation, those negotiations have not resulted in agreement and any action might not occur until early 2021. 

  • What are the outcomes of the state legislative elections in November?  

Amid these uncertainties, the governor, the state’s fiscal agency Minnesota Management and Budget (MMB), and all state agencies are hard at work to develop Walz’s proposal for the state’s next two-year budget. Currently, state agencies are preparing a menu of budget options for the governor to consider, which happens during the confidential budget development process. Agencies are asked to describe their priorities, including a review and prioritization of current activities, and develop options to save money, particularly in the state’s General Fund. Agencies can make requests for new funding in some limited cases, after conversations with the governor’s office and MMB.  

After the state’s November budget and economic forecast is released at the beginning of December, the administration will have another very important piece of the budgetary puzzle: updated information about projected revenues and spending under current budget commitments, which they will use to make decisions about what will go in the governor’s budget proposal.  

The executive branch review and analysis will culminate with the governor’s budget proposal released no later than January 26, 2021, as required by state law.  

That’s just the start of the budget-setting process. Next, the Legislature takes up the baton to work through its role in developing and passing the state’s budget. Often that budget work starts in earnest after the February forecast is released.  

What does this mean for the 2021 Legislative Session and budget debate? 

We’ve been hearing from advocates thinking ahead to 2021 about how to balance the reality of the state’s budget shortfall with the conviction that this is a moment for policymakers to act boldly to tackle the public health, economic, and racial equity challenges facing our state.

We all must continue to lift up what’s needed for Minnesotans to be healthy, safe, and financially secure. We must talk about the essential role that schools, health care, affordable housing, and other public services play in building thriving communities – and why we must change the ways we’ve fallen short, especially for our Indigenous neighbors and communities of color. 

We all can emphasize what’s needed while still taking the budget shortfall seriously. The way to do that is by calling on policymakers to draw on the resources needed: the state’s budget reserve, robust federal aid to states, and raising state revenues – particularly by asking those doing well, like profitable corporations and the wealthy, to shoulder more of the responsibility of funding essential public investments to secure the health and well-being of all Minnesotans.