State of Minnesota is projecting a $1.3 billion budget surplus

Lawmakers will decide how to spend it in the next session.
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Minnesota is projecting a $1.3 billion budget surplus heading into the 2020 legislative session.

Minnesota Management and Budget (MMB) on Thursday morning announced a "better than expected close to the last biennium," which coupled with a slight drop in spending has led to a $1.332 billion estimated surplus for the 2020-21 biennium.

A portion of that will be automatically placed into a budget reserve account to be used in the event of economic downturns, which as a result will swell to just under $2.4 billion.

With 2020 not a budget-setting year, it will mean the surplus will be all the more fiercely contested by lawmakers looking to allocate extra spending or tax cuts.

The Legislature is still split between the Republican-controlled Senate and Democratic-controlled House – with DFLer Gov. Tim Walz wielding veto power.

But with the 2020 elections coming up, with control of the House and Senate up for grabs, lawmakers will likely be looking for budget moves that boost their chances at the ballots come November.

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That said, MMB notes that while the state's economy and revenue continues to grow, there remain "challenges" looking ahead to the 2022-23 biennium.

Among the things that have helped state revenues this year has been an increase in pull-tab gambling income, which will see the U.S. Bank Stadium reserve fund to increase from $98 million to $124 million in 2020-21.

But the surplus might have been higher if not for a court case that found against the state for the way it classified "resident" trusts for tax purposes.

As MPR reported in August, trust rules were tightened to stop state residents from shifting their trusts to lower-tax states to reduce their tax liabilities. But the court found that the state shouldn't be able to tax a trust with minimal ties to Minnesota but just so happened to have been created when the founder was resident in Minnesota.

The state on Thursday lowered its tax revenue estimates by $124 million as a result of the case.

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