Minnesota is expected to complete its current fiscal biennium in June with $678 million left on the bottom line, according to the November budget forecast released Friday.
This takes in account the $334 million that will be automatically transferred to the state’s budget reserve as required by law. This action will bring the state’s budget reserve to $1.9 billion, just shy of its $2 billion statutory goal.
The news led talks to resume around the possibility of a special session before Christmas and potentially deliver Minnesota’s rural school districts the Ag2School 40 percent bond credit program for farmland.
Special Session in December
Major political players in St. Paul are targeting Dec. 20 as the date to come in and tackle some of the major unresolved issues from this year. Those include the tax bill, the bonding bill and a new proposal to buy down insurance premiums for those buying health coverage through MNSure’s individual market.
The tax bill is the most significant piece for rural school districts as it contains the Ag2School program.
Inside the Forecast
The forecast shows a $736 million surplus for the next fiscal biennium (FY 18-19). When added to the $678 million current fiscal year projected surplus , the total surplus reaches the “$1.4 billion” figure shared in some media headlines. It’s important to to note that a significant portion of the $1.4 billion surplus figure is one-time money carried forward from the current fiscal year.
There’s also no inflationary assumption built into the forecast. If the state applied an estimated CPI factor into the forecast, the FY 18-19 surplus shrinks to $87 million.
The latest forecast shows a $1.5 billion surplus for the tails of FY 2020-21, with no inflationary factor. When factoring in inflation, the figure could actually look like a deficit.
The bottom line is that while the headline numbers look good, there’s still a lot of uncertainty about the economy moving forward. The current forecast assumes GDP growth just above 2 percent for the foreseeable future instead of figures north of 3 percent that were hoped for a year ago.