Minnesota's financial fortunes have experienced an upturn in recent months, with the state now projecting a $1.6 billion surplus for the upcoming two-year budget cycle.
The new projected figure was released by the Minnesota Management and Budget (MMB) Friday morning, and shows a remarkable turnaround for state finances a year after the COVID pandemic started.
In July, the state was projecting a $4.7 billion deficit for the 2022 and 2023 financial years after the state shut down to prevent the spread of the deadly virus. By November the surplus was projected at $1.28 billion.
MMB says that the return to a projected surplus is due to "an improved U.S. economic outlook that is bolstered by large federal actions that have emerged since November and were not incorporated in earlier projections."
However, MMB in its release did announce that the improvements to the economy have "not been spread equally," noting that "unemployment continues to disproportionately impact lower-wage workers."
It will set up a battle in the Legislature over the next budget proposal, with Gov. Tim Walz having recently released a $52.4 billion budget that includes an increase in state taxes for those earning more than $1 million and an increase in the corporate tax rate for large, profitable companies.
This would be used to fund additional spending on schools, internet infrastructure, and providing assistance to small businesses, among other things.
But the plan is being opposed by the Minnesota GOP, which does not want any tax hikes, and currently controls the Senate through which any budget will need to pass.
Walz has previously said he would alter his budget proposal based upon Friday's projections.