Minnesota’s budget forecast and outlook have improved significantly since November with a larger surplus expected for the fiscal year that ends in June.

Minnesota Management and Budget officials released the February budget forecast on Friday. The upshot is that a higher revenue forecast, lower state spending and an increased surplus have produced a projected $1.6 billion surplus for the next fiscal biennium.

That’s up from the $1.3 billion shortfall projected for the next biennium in the November forecast.

The U.S. economic outlook also has improved considerably since last all and an infusion of federal money into the state has softened the budget blow from the pandemic.

Gov. Tim Walz may issue some adjustments to his budget plan released in January. Legislative leaders will now begin to shape their budget plans in earnest in the coming weeks.

Cautionary Notes

While the headliner number, $1.6 billion, sounds good, the underlying data and information show continued cautionary notes.

  • The forecast still has $400 million less revenue than pre-COVID projections for the next biennium.
  • Unemployment continues to disproportionately impact certain populations and sector of the economy.
  • Much of the revenue growth is from one-time resources.

The forecast risks include uncertainties around the path of the pandemic and new viral strains, future federal support, consumer behavior, business confidence and potential market volatility.

State Budget Director Bridget Reitan noted that expenditures are down $83 million as we head toward a close of the current biennium. For the next biennium, spending is down $456 million, with a significant portion coming from pupil losses in the K-12 system. Increases in federal matches for social services programs is resulting in lower HHS spending.

View Budget and Economic Forecast (mn.gov)