With the DFL set to assume its "trifecta" of legislative and executive control after winning the House, Senate, and Governorship in November, Minnesota is projecting a massive $17.6 billion budget surplus.
The latest budget projection released Tuesday is a significant jump on the $12 billion projected in the previous forecast, which Minnesota Management and Budget said follows "strong collections and lower-than-projected spending."
The budget office says net general fund revenues were 6% above forecast in October at $2.2 billion, driven by higher-than-expected income and general sales taxes at a time when Minnesota has the lowest unemployment rate in the country.
While the surplus presents a major opportunity for the DFL to address some of its top priorities in the next legislative session, a significant chunk of it will go towards covering inflationary spending increases within the state's existing budget.
Minnesota's budget projections haven't included inflation since a law requiring it was repealed in 2002, and as such the $17.6 billion headline figure is somewhat misleading.
A portion of the surplus will also be used to top up budget reserves to protect against recession – concerns over which are rising at the moment. What's more, $7 billion of the surplus is funding left over from the last legislative session, when a spending agreement couldn't be reached between the House-led DFL and GOP-led Senate. As such, this is considered one-off funding that's not suitable for ongoing spending.
Nonetheless, there will still be a significant chunk of money left that can be used by the DFL to address some of its priorities.
One of the major priorities for Gov. Tim Walz during his re-election campaign was increasing funding to schools by funding a $960 million special education cross-subsidy.
The federal government mandates special education be provided in public schools, but doesn't provide enough funding to cover the cost. Walz says that if the state spends $960 million to close this funding gap, public schools would have more money to address other areas of shortfall.
Another element Walz has indicated interest in is cutting state taxes on Social Security income, something that has been backed by the GOP in the past, as well as providing direct $1,000 or $2,000 checks to Minnesota households.
House Speaker Melissa Hortman told MPR News that spending for child care, starting a paid family and medical leave program, and emergency funding for police departments across the state would also be among the priorities, while new Senate Majority Leader Kari Dziedzic said school mental health services and nutrition assistance are among her priorities.
State Republicans have swiftly called for tax cuts in response to the budget surplus.
There was $4 billion in tax cuts on the table during the budget negotiations between the DFL and GOP this past spring along with $4 billion in spending on education and public safety, but a deal could not be reached on the details.
Republican gubernatorial candidate Scott Jensen urged the GOP not to pass anything other than tax cuts, and hold out for more control following the November elections.
The gamble backfired, with the DFL winning control of both chambers of the Legislature.