The newly released state budget forecast shows an eye-popping $7.7 billion surplus for the state’s general fund.

The previous fiscal biennium, which closed on June 30, 2021, ended with nearly $3.3 billion in surplus cash. An additional $1.2 billion in federal relief was left on the table when they closed the budget session in June of 2020. For the biennium that just began on July 1,2021, the state is projecting a nearly $4.3 billion surplus, and that’s after the state’s budget reserve has been fully replenished to the statutory level of $2.65 billion. Surplus revenues are projected into the next biennium, fiscal years 2024-25 as well. The astounding surplus news set off the usual partisan calls for tax cuts and new spending by GOP and DFLers respectively. This time, there appears to be enough money to do both.

See MN Management & Budget’s forecast presentation.

E-12 Expenditures down $326 million

During the press conference on the budget forecast, MN Management & Budget (MMB( staff noted E-12 expenditures are projected $326 million lower for the current biennium, mostly due to few students projected in the system. When asked for clarification on this point, MMB said a lower birth rate has been factored in, that the pre-pandemic figures they were using simply have not, well, born out.

Compensatory Aid is projected to be down $39 million this biennium, due to fewer students qualifying for FRE status. Page 63 of the budget forecast report details the projected change items for the E-12 budget.

What happens next?

The regular legislative session will commence on January 31, 2022. Talk of a special session to pass “Hero Pay” or bonus checks to frontline workers continues, and the surplus news will factor into DFL pressure to expand the eligible pool of workers receiving checks.

The surplus news factors into the GOP’s call to have the state pay the feds for the $1 billion owed to the federal unemployment trust fund, instead of charging businesses on their unemployment insurance premiums for this debt. It’s possible they could come to terms on a deal between these two pieces before the start of the regular session. However, the budget forecast news greatly complicates the life of a non-budget year as legislators are looking at new re-districting maps and a heated midterm election cycle.