Minnesota's expected budget surplus over the next two years has been cut nearly in half compared to a projection in November.
Minnesota Management and Budget announced on Thursday that the state is projected to have a $1.052 billion budget in the 2020 and 2021 biennium.
However this is $492 million less than the forecast in November, which stood at $1.544 billion.
A surplus of just over a billion would leave Gov. Tim Walz and the Legislature with less leeway on additional spending, particularly taking into account that a third of the surplus would automatically be placed in the state's rainy day reserve fund.
MMB said that the cut in the projected surplus is the result of "slower projected economic growth and lower observed collections compared to prior estimates."
It also said that Minnesota state spending is projected to outstrip income in 2022-23 based on current projections.
Gov. Walz said that this slowed growth "validates the approach we proposed in our budget," which actually contains a proposed a $3.5 billion increase in spending compared to the current state budget.
"Our budget looks to the future, and that’s exactly what you need to do when facing slower economic growth. We must make investments that continue economic growth, and my investments in education, health care, and community prosperity will do just that.”
He also urged caution and for the state to remain fiscally responsible at a press conference on Thursday.
Senate Majority Leader Paul Gazelka said that with the economy slowing down and revenue reducing, lawmakers "need to be careful about any new tax increases foisted on the very people who will drive our economy in the future – the middle class."
It comes after Gov. Walz proposed a 20 cents per gallon increase in the gas tax to pay for road and bridge infrastructure, the impact of which he said would be mitigated partly by increases in working family tax credits.