(Story updated at 2:05 p.m.)
Fueled by “extraordinary growth” in income, consumer spending and corporate profits, Minnesota is expected to have a budget surplus of $ 7.7 billion for the 2022-2023 biennium.
This news was shared by Minnesota Management and Budget on Tuesday as part of its November 2021 budget and economic forecast.
The second of two annual economic estimates the state uses to inform its budget and policy decisions, the November forecast continued the optimistic outlook in the February 2021 budget and economic forecast which projected a surplus of $ 1.6 billion. .
“This is good news for Minnesotans today … it’s crystal clear, our economy is strong and growing,” Governor Tim Walz said at a press briefing held by state officials.
[WATCH >> Gov. Walz responds to latest budget forecast]
He called the projected surplus a “remarkable opportunity” to improve the economic situation of all Minnesotans. Walz said he was focusing on cutting costs for people “on the things that impact their lives,” as well as investing in middle class and working families, and lending a helping hand. to those in difficulty.
House Majority Leader Ryan Winkler (DFL-Golden Valley) echoed the governor’s comments and expressed support for efforts to push for paid sick leave for all, higher wages for essential workers and improved education and health care across the state. He said the House would not cut taxes for “big business and the rich” at the expense of the less fortunate.
“When we help workers, families and small businesses thrive, they grow our economy,” Winkler said in a statement.
Minority parliamentary leader Kurt Daudt (R-Crown) also said the latest forecasts provide opportunities for lawmakers to take action.
“While the government is bursting with cash, the Minnesotans are still grappling with inflation to 30-year highs, gasoline prices rising 50% or more and a sticker shock on their oil bills. energy, “Daudt said in a statement. “This record surplus gives us a real opportunity to help make Minnesotans’ lives more affordable and prevent Governor Walz and the Democrats from raising taxes on struggling businesses later this month.”
Businesses across the state are expected to face a tax hike in December to replenish the UI trust fund, which finances unemployment benefits for workers. The fund is running a billion dollar deficit and the state has borrowed money from the federal government so that assistance to the unemployed can continue.
The estimated surplus of $ 7.7 billion will be the focus of concern when the Legislature meets for its next regular session on January 31, 2022. MMB officials have said it includes a $ 3.1 billion rollover. dollars starting in fiscal 2021; $ 127 million unspent at the end of the 2021 legislative session; and $ 5.5 billion which is expected to be earned by the end of the current biennium in June 2023.
However, the laws require that part of the surplus be used to replenish certain state accounts, including $ 870 million for the state budget reserve and $ 111 million for the government reserve fund. American bank stadium. These funds are also factored into the total of $ 7.7 billion.
The forecast does not include money from the American Rescue Plan Act recently signed by President Joe Biden, which will provide $ 1.9 trillion in stimulus to states intended to fuel economic recovery and provide assistance to the states. public health programs.
Minnesota is expected to receive billions of dollars under the law, but MMB commissioner Jim Schowalter said the November forecast focused on the state budget and spending. He said the surplus “resets” the budget as the economy learns to adjust to the pandemic.
“The net income of $ 7.7 billion in today’s forecast is out of the ordinary, even in these extraordinary times,” he said. “The state’s fiscal position is strong and we have the opportunity to take unimaginable measures last year. “
Schowalter said that a substantial part of the surplus is not speculative and that about “$ 3.1 billion” is already “money in the bank.”
IHS Markit, the state’s economic consultant, said several important economic variables such as employment and inflation-adjusted consumer spending showed stronger-than-expected growth this year. The company believes the economy will continue to grow in 2022 as more people return to work, supply chain issues are addressed, and progress in the fight against the pandemic continues.
IHS cited supply chain improvements and increased headcount as factors expected to help slow inflation by the end of next year.
Minnesota’s unemployment rate is 3.5%, 1.1% lower than the national rate and 14e the lowest in the country. But the workforce has also shrunk by 84,000 since the start of the pandemic due to retirements and those who have chosen not to participate. This is expected to contribute to strong wage growth over the next few years and IHS expects the employment rate to return to pre-pandemic levels by the middle of next year.
State economist Laura Kalambokidis warned that the forecast of the forecast was based on the assumption that the COVID-19 virus would continue to decline and said the November forecast was completed before the emergence of the omicron variant.
“The outlook for the United States remains uncertain, of course,” she said, “and depends on the evolution of the pandemic and the responses of households, businesses and governments to the changing landscape of the United States. public health”.