The 2020 legislative session is running on all cylinders with full committee agendas and legislative leaders staking out their priorities as they look to the end of session and the November election. It all comes in the midst of an improved budget forecast released on Thursday.

  • The House DFL majority is rolling forward with several bills on hot topics like expanded insulin coverage, gun violence prevention, $500 million in new spending on early childhood education programs and is positioning themselves for a large bonding bill that will likely eclipse the Governor’s $2 billion request.
  • The Senate GOP is moving quickly in the opposite direction. They have different, more limited ideas on the policy agenda and instead of new spending they want to return $1 billion of the now projected $1.5 billion surplus to taxpayers. As for the bonding bill, they will work to hold the line on the total price tag, historically around $1 billion, but some in their caucus have quietly acknowledged they will need to do more than $1 billion in bonding this session.

Improved Budget Forecast

The latest budget projections show a surplus of $1.513 billion, an increase of $181 million from the November forecast. While that is good news, it is important to note that the majority of that surplus is only one-time money. View the state’s presentation: Budget and Economic Forecast Presentation

Two main factors driving the improved forecast include:

  • An increase of $96 million in revenues
  • Decrease in overall spending of $91 million

There were slight increases in spending in the areas of Property tax aids and credits in Health and Human Services that were very minimal. There was a reduction in E-12 Education spending based on a reduced number of students.

Forecast risks noted by the state include:

  • Trade policy uncertainty
  • Financial market volatility
  • Consumer confidence
  • Time (There are 16 months remaining until the end of FY 20-21.)
  • Coronavirus (If the outbreak is prolonged and widespread it could have a seriously detrimental effect on the State’s finances.)

Focusing Priorities

Care needs to be taken in how the majority of the surplus is used and discussions on the best use of the surplus will certainly be the second most important conversation at the Capitol in the coming weeks behind the crafting of the bonding bill for the legislative session.

What’s the Governor’s Plan? A Supplemental Budget request from Gov. Tim Walz is expected in the coming weeks. He has indicated he wants to bank the bulk of the surplus for the 2021 budget session. Walz will deliver his state of the state address to the legislation at 7pm on March 23.