Minnesota's improved budget forecast released Tuesday is thanks in part to Minnesotans spending more than expected on goods like furniture and electronics and the state government spending less.
Minnesota Management and Budget (MMB) released its updated forecast Tuesday, projecting a surplus of $641 billion for the fiscal year 2020-21, which ends in June 2021.
It is also projecting a $1.273 billion budgetary shortfall for the fiscal year 2022-23, which begins in July 2021.
"Someone told me this morning they had forgotten you could get good news in 2020. … The reason this is good is because of the resiliency of Minnesotans," Gov. Tim Walz said in a news conference Tuesday.
Both are materially better than what was projected in May, which included a more than $2 billion deficit for the 2020-21 biennium and an even larger deficit for the 2022-23 biennium.
The May forecasts were made as the COVID-19 pandemic was taking hold. But now eight months into it, forecasters have a better picture of how this will play out, noting the state's general fund revenues, which includes tax revenues, is higher than expected.
This, in part, is due to people shifting away from spending on services most affected by social distancing and instead are buying durable goods like furniture and electronics, which are boosting the state's sales tax collections.
Relief package coming?
The improved budget outlook is good news for Minnesotans and many businesses who are in need of relief due to the COVID-19 pandemic and subsequent shutdowns.
Gov. Walz and both parties in the Legislature have expressed hopes of passing a financial support package in the wake of the latest four-week "pause" that has seen restaurants, bars, gyms, and entertainment venues shut down. (MMB says it has factored in this four-week pause but doesn't account for any extension beyond Dec. 18. That being said, Walz has not said if he's going to extend the current restrictions, only that they're waiting to see more data first.)
Walz during a news conference Tuesday said this improved budget forecast will allow for a robust relief package, which he says he'd like to see between $300-$600 million, noting "we have the numbers now" so he hopes to see a deal in the next week or so.
"I'm going to encourage the Legislature, and I know they're doing a great job with this, to keep the small business package moving forward," Walz said.
The governor would like a relief package targeted at helping those most impacted, like small businesses, who have – through no fault of their own – seen their financial health impacted to protect the greater good. He'd also like to see the extension of federal unemployment benefits for Minnesotans, which is set to expire at the end of the month.
"We bridge these folks to the new year. We bridge them to a potential federal relief package to small businesses, and we bridge this until we start getting folks vaccinated and the threat to our hospitals starts to become reduced," Walz said. "We have that capacity now. And that means taking care of those workers."
That said, Walz reiterated that more substantial support is needed at the federal level, and has called on Congress and President Donald Trump to pass a bill providing that support.
House Minority Leader Kurt Daudt, R-Crown, also called on using the budget surplus to help Minnesota businesses. His full statement:
"We have Minnesotans to thank for today's good news — their hard work and sacrifices in the face of an extremely difficult year has helped stabilize the state budget. The surplus belongs to them, and should be used to help the businesses and employees who were once again forced to closed.
"Raising taxes on families and businesses who are working to survive and get back on their feet should be an absolute non-starter. We have a healthy budget reserve, and government must cut back the same way every other Minnesotan has over the past year."
The Minnesota Chamber of Commerce is also calling on the state to pass legislation to support businesses amid the forecasted surplus.
"We're laser-focused on speeding relief to Minnesota businesses and our economy as a whole. the good news of this forecast means that the legislature can take immediate steps to help stabilize small and medium-sized businesses and jumpstart economic recovery throughout the state," Minnesota Chamber President Doug Loon said.