Minnesota Management and Budget’s annual February economic forecast projected a budget surplus of $1.513 billion for the 2020-21 budget cycle.
That figure is a $181 million increase from the November forecast, which predicted a surplus of $1.3 billion. Similarly, the November 2019 forecast was nearly $300 million higher than the projected surplus of $1.05 billion in the February 2019 forecast.
“Minnesota’s budget and economic outlook remain stable. A small increase to the general fund revenue forecast along with a similar-sized reduction in spending estimates result in a projected surplus of $1.513 billion for the FY 2020-21 biennium, $181 million larger than the November estimate,” Minnesota Management and Budget said in its economic forecast, which was released Thursday.
“The general fund budget reserve remains at $2.359 billion in FY 2020-21 but current law reduces it by $491 million at the beginning of the next biennium. As in November, the economic outlook is stable but a slowdown remains in the forecast,” said the report.
Tax cuts or spending?
The new budget forecast is already intensifying debates at the State Legislature about whether to spend the money on government programs or return it to taxpayers.
“It’s good news we have a budget surplus, but I would caution the governor, his commissioners, and my fellow legislators to rein in the unnecessary spending,” said Sen. Julie Rosen (R-Vernon Center), chair of the Senate Finance Committee.
“First, we have some immediate priorities that we have to address, like filling the disaster relief account and replenishing the reserves. Second, we should return as much of the surplus as possible to the taxpayers who built it. A little tax relief can go a long way for families that are working hard just to make ends meet,” she continued. “Finally, we shouldn’t pretend everything is great just because there is a surplus. For too long, government spending has grown at an unsustainable pace, and there are billions of dollars of examples of waste and abuse. Rather than think about a wish list of extravagant spending ideas, we should focus on finding and cleaning up those messes in government agencies.”
Senate Republicans unveiled their “Get Your Billion Back” plan last week, which would return the surplus to taxpayers in the form of tax cuts and reforms. Republican leaders in both the House and Senate reiterated their intention to purse tax relief during a Thursday press conference.
“The billion dollar budget surplus means it’s time for tax relief for Minnesota families,” said House Minority Leader Kurt Daudt (R-Crown). “House and Senate Republicans are putting forward specific plans to deliver more than a billion dollars back to taxpayers including the elimination of the unfair tax on social security. Gov. Walz and House Democrats should come to the table, tell Minnesotans what their plan is, and whether they will commit to passing a tax relief bill this session.”
House Democrats have said they want to use $690 million of the surplus for climate change initiatives and early childhood education, The Minnesota Sun reported. On Thursday, House Speaker Melissa Hortman (DFL-Brooklyn Park) said there is only a surplus “in the true sense of the word if Minnesotans believe that we’ve fully invested in what Minnesota needs.”
“We need to make investments in education, health care, and families’ economic security,” she said in a statement while House Majority Leader Ryan Winkler (DFL-Golden Valley) criticized “irresponsible Republican tax cuts.”
“Today’s forecast is good news, but it’s more of a one-time bonus than a sign of a prolonged economic bump, with challenges for Minnesota’s budget in the future,” added Senate Minority Leader Susan Kent (DFL-Woodbury). “We should strike a balance between making smart investments in Minnesota’s needs without threatening our state’s long-term economic health.”
Gov. Tim Walz called the surplus “good economic news” and laid out his vision for how to use the funds.
“We must listen to what our communities are telling us,” he said. “And they are urgently telling us that they need our support to increase access to safe drinking water and affordable housing, fix local roads and bridges, improve safety infrastructure, and protect their lakes and rivers.”
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