Minnesota’s budget reserve is strengthened and the state’s budget outlook gives us short-term good news, according to today’s release of the November Budget and Economic Forecast by Minnesota Management and Budget. Even though the Minnesota Budget Project staff are at a conference in DC – we had to take a look. Here are our first takeaways:
- Today’s November Budget and Economic forecast showed the state is expecting a $1.3 billion positive balance for the remainder of the FY 2020-21 two-year budget cycle. That’s after $284 million was automatically transferred to strengthen the budget reserve.
- The forecast predicts a $220 million structural balance for FY 2022-23. However, that doesn’t take into account what it would take for most current public services to keep up with inflation. When the impact of inflation is accounted for, the balance in FY 2022-23 turns into a deficit of $991 million. These figures provide the most accurate picture of the state’s budget situation – it’s important to understand that the $1.9 billion “available balance” for FY 2022-23 includes the $1.3 billion surplus for FY 2020-21.
- With the budgetary outlook worsening significantly in the next biennium, this means that the investments that policymakers can make in Minnesotans this session are largely going to be one-time. They are essentially an opportunity to make a down payment on the investments the state needs to support a prosperous Minnesota.
- The economy is expected to continue growing over the next several years, which is good news. However, that growth is slow, which could more easily turn into a recession.
Today’s forecasted surplus means that Minnesota will have a stronger budget reserve. A strong budget reserve is important to be able to meet Minnesotans’ needs in future tough times. While today’s transfer finally brings the reserve to its recommended level, in the 2019 Legislative Session policymakers unfortunately decided to take out nearly $500 million in July 2021, substantially weakening the reserve, so it was imperative to undo that damage.
The surplus announced today also means that policymakers have an opportunity to make some investments that build prosperity throughout the state in the upcoming legislative session. They should prioritize our Minnesota neighbors struggling to afford the essentials they need to thrive, such as child care and health care. But after many decades of wage stagnation for many workers and years of under-investment in our communities, there’s still more work to do to sustainably raise the resources needed to invest in great schools, thriving communities, and other building blocks of lasting and shared prosperity for all Minnesotans, no matter who they are or where they live.