With just a few days to Christmas, a significant gift is headed to millions of Minnesotans that will play out in different ways in the coming months.
The money comes from a largest-ever Minnesota budget surplus of $7.7 billion combined with the state’s existing $2.4 billion budget reserve plus $1.1 billion in unspent federal COVID-19 relief money and $250 million more of federal dollars from the as yet unspent “pandemic bonus.”
If you consider the 5.7 million of us and divide it by the available money, some of which is already dedicated to COVID relief causes, it amounts to over $2,000 per person. That’s a significant, though indirect, bump for holiday shoppers to appreciate.
Analysts explain that higher-than-expected tax collections, an improved outlook for personal and corporate income, increased consumer spending and corporate profits over the next two years play into the calculation.
IHS Markit, an economic forecasting firm, predicts that average wages and salaries in Minnesota will grow at 8.5 percent for 2021 and 7.3 percent in 2022. By 2023, that state economy will likely settle back to the traditional 2 percent growth range.
Minnesotans in the past have said they may consider, when necessary, higher taxes on high net-income individuals and couples and about half are open to a sales tax on clothing. They do not favor extending the sales tax to business services.
Explaining two of the needs within the state will show just what policymakers face in the 2022 when the House and Senate lawmakers convene late next month. A May adjournment is anticipated prior to the Nov. 8 general election where Minnesota’s state constitutional officers and each of the 201 state lawmakers will be selected.
For his part, the governor says that the state’s economy is “strong and growing” and his priority for new spending is in providing workers paid family and medical leave, boosting early childhood education programs and reducing the cost of energy. Presumably, most DFLers would agree.
Republican lawmakers, however, have a somewhat different take. With the rising prices Minnesotans are now paying, they would reduce taxes.
Two current spending priorities:
- Filling a $1 billion deficit in the state’s unemployment insurance trust fund. Without such action, Minnesota businesses face a payroll tax increase, which is unpopular to most politicians.
- An expansion of pandemic bonus checks to frontline workers. This was approved a few months ago, but lawmakers never reached an agreement on the size of the checks or who should get them. This could cost an additional $250 million.
Of the state’s half million taxpaying businesses, some 94% have fewer than 50 workers and over half employ only the owner/operator. Larger employers succeed as well as Minnesota ranks third in the nation in Fortune 500 companies per 1 million people.
Public employees serving local, regional and state governments are also taxpayers who reap rewards from the state’s economic energy.
Truly, as we enter 2022, the state is well positioned and proves that there are tangible reasons for the “Minnesota nice” moniker. Making us special could be noteworthy friendliness combined with strong family ties and sense of community.
And also a healthy balance sheet.
Chuck Slocum is president of The Williston Group, a management consulting firm. He can be reached at Chuck@WillistonGroup.Com