The Minnesota revenue surplus is now $17.6 billion.
That’s a lot for a state that spends about $2.16 billion a month and sets up Gov. Tim Walz and the DFL-controlled Legislature to increase spending and reduce taxes.
“Strong collections and lower-than-projected spending add to the fiscal year 22-23 surplus,” Minnesota Management and Budget reported Tuesday morning. “Economic headwinds lower expected growth but (a) large leftover surplus and healthy net revenues in fiscal years 24-25 create estimated $17.6 billion available for (the) budget.”
Prior to this update, the state was officially sitting on a $12 billion surplus for the final six months of the current budget and the next two-year budget. But since that forecast was released last winter, tax collections have continued to be strong and jobless rates have hit record lows.
Minnesota Management and Budget will release more details later Tuesday on both the revenue expectations and the condition of the state and national economies. Walz and legislative leaders will react to the documents following the MMB presentation.
This economic and revenue forecast is what Gov. Tim Walz relies on when he makes his two-year budget proposal to the Legislature in January. Legislative budget writers, however, can wait until another forecast that comes out in mid-February.
Asked about the forecast last week, Walz said he expected it to reflect little change from the current forecast that came out in February of 2022. That’s the forecast that shows the state would have a surplus of $12 billion over the next 30 months. But since then, economic uncertainty has only increased, and Walz said he is keeping an eye on national and global events.
“I think we need to be cognizant of the next several quarters on growth,” he said. “In the environment we’re in globally between Ukraine and China and other things, there could be a lot of instability over these next 90 days.”
That said, however, the DFL governor said he didn’t want to be overly cautious: “Being cautious and prudent is not an excuse for not making the investments that are fundamental to the growth of that economy.”
Despite economic warnings, the state has continued to collect more in taxes than it predicted in February. The last economic update, however, stated that a short recession is expected.
This forecast has the nuance of covering both the final six months of the current two-year budget period and the entire two years of the next budget that begins July 1, 2023. Lawmakers can adopt a supplemental budget with tax and spending changes for the rest of this budget, but they aren’t obligated to. They must, however, adopt a two-year budget by June or risk a state government shutdown.
Unlike the last two Walz-authored budgets, this one will be presented to a Legislature that is controlled by his fellow DFLers.
Republicans, meanwhile, immediately urged tax cuts. “Minnesotans are being massively overtaxed, and we should spend most of the next session working to give as much of it back to Minnesotans as possible,” incoming House Minority Leader Lisa Demuth, a Republican from Cold Spring, said.
The size of the surplus is as large as the state has had in at least two decades. As a frame of reference, the state spends about $2.16 billion a month. It also has a rainy day fund of $2.67 billion that can be tapped by legislators to soften the impact of future revenue deficits.
I hope they can come to a consensus to lower the sales tax. Everyone pays it, which means everyone benefits from a lower rate. MN has one of the highest sales tax rates in the country.
Minnesota also has one of the highest state income tax rates in the country. Our rate of 5.75% on the first $40,000 of a married couples income is higher than most states highest rate. We’re also one of twelve states to tax social security. For anyone that owns property, we are experiencing double digit increases in property taxes.
Yes , we are over taxed. We didn’t create a $17 billion surplus by not taxing people enough.
I think it would make much more sense to leave sales and income taxes where they are any use on-going revenue surpluses to give more property tax relief to lower income seniors.
People with low incomes benefit the most from lowering the sales tax.
You’re seeing increases in property taxes because local taxing authorities are adjusting for inflation. Part of the state budget surplus is a mirage because the tax receipts include the effects of inflation but the spending budget is required by law to ignore inflation.
If we don’t increase state spending we are looking at a possible collapse in services. I saw an article yesterday that there are 53,000 open positions for direct care workers in healthcare (https://www.mprnews.org/story/2022/12/06/report-minnesota-health-care-workers-leaving-at-crisis-rates). My local school district hasn’t had all of its bus routes staffed for several years and there are constantly open positions for paraprofessionals. There are thousands of adults with special needs who qualify for daytime services who can’t get services because there are no openings. If we think these services are important (and they are) then we need to pay people enough to take the jobs. It does no good to “provide services” in theory if they can’t be delivered in practice.
And highly regressive
What’s pathetic is, when the majority of the people in this state work for government, that majority won’t see this debacle as bad news, but rather something to be celebrated. “You will own nothing and you will be happy.”
“majority of the people in this state work for government”
“In Minnesota, 14.6% of the workforce are employed by the government — either at the state, local, or federal level — the 15th lowest share of all states”
Last check 14.6% is a far lower number than 50%, why the misinformation?, don’t you know how to use internet search tools?
https://www.thecentersquare.com/minnesota/this-is-how-many-people-work-for-the-government-in-minnesota/article_095b589f-3e58-5032-8826-77938a50311c.html
Name another employer that employs more than 15% of the population.
Well sir your statement was:
“the majority of the people in this state work for government” it was not 15%, so what is your issue, ticked off because you got called out on your blatant misinformation?
Just so you understand, “government” is also not a single employer either (and does not operate like one), since the 15% number Mr Wagner helpfully found to debunk your nonsensical claim consists of hundreds of different government entities, all with unique concerns.
So your argument is beyond ridiculous. And was absurd on its face.
Minnesota pension commitments are only 83% covered (compared to 90% nationally) with a $17 billion unfunded obligation. Might it be time to reduce that shortfall by several billion dollars?
Mr. Callaghan, when you tell us that this surplus is as large as the state has had in twenty years, how are you measuring that? Are you using nominal dollars? Or are you using the more accurate real or inflation adjusted dollars? Or are you measuring the surplus as a percentage of the MN GDP?
Please clarify this. I made more dollars in 2022 than in any other year, but that doesn’t mean my standard of living is higher than it was in 2002.
Many of us seniors on fixed income have been struggling due to inflation, especially in the area of food and fuel. But now…we are hit with another…my house increased in value drastically for the second year in a row and this year, my property taxes went up 22.3%…in just one year.
They inflate the price of one’s home but ignore the homestead exemption, which decreases, as the value of the house increases. It’s still a small 2 bedroom house that property taxes should not make unaffordable.
With all this massive surplus we should be doing more for the needy.
But…first we need to help the homeless. At least I have a home.
The DFL will do what they always do. They will reward the groups that spend huge amounts of money to get them elected.
Unions, trickle down education, Government employees will be the first to be “rewarded.”
Of course, those who pay little or no State taxes will also be next in line.
Taxpayers will receive some of their own many back, but only after the special interest are taken care of first.
Spending will have huge growth because of the Biden “transitory” inflation.
Who are these “special interest groups” who are spending “huge amounts of money”? You only mention Unions and “trickle down education” (whatever that is) and govt employees. I’m a (county) govt employee and I assure you that I don’t make huge donations. I’m also underworked and overpaid, right?
$17.6 billion?!? This is just sick.
We have people who think our money is their money.
If they truly cared, they’d give it back to those that paid it.
Just thinking, 17.16/2.16~8.15 months of finance. Just had a discussion with a friend about emergency funding, he suggested minimum of 3-6 months, back in 2006-10 was better to have close to 3 years. So it appears our conservative folks, comments above, would rather not have money in the bank when times get tough, better to operate the TPAW way (deficit and gimmick budgets) vs be prepared for a potential recession, (which is the general thought in the market place for anyone watching, down ~ 3-4% last 2 days). Begs the question, who to trust, money in the bank politicians, or the deficit and gimmick politicians? Personally, we like to run our household budget on a surplus and not a deficit, guess that’s why I tend to lean conservative, sorry liberal (conservative) financial model. You know Boy Scouts be prepared, better to have cash in the bank when you don’t need it, than no cash when you do need it!
Dennis, many of us “liberals” also think we should use more of this surplus to build up a rainy day fund to a size significantly bigger than it is.
That attitude would only make sense if you worked for the government and saw taxation as your source of income. Unfortunately, that’s the case for over half of the state’s residents. But that is not the government’s money. The “rainy day” fund you’re referring to should apply to individual families first, not the state.
Given who should benefit from a “surplus” of funds to deal with the coming recession, the priority should be the citizenry, not the salaries of “public servants.”
The A part is “WE ARE THE GOVERNMENT” it is still our money! Seems some folks struggle with that. It belongs to the citizens of the state of Minnesota. We elect representatives to allocate and spend our money on what they/we consider good for us citizens of the state of Minnesota, tough to understand for some I guess. Some may go to some families, some may go to others, some may go to capital investments, etc. etc. etc.
“Given who should benefit from a “surplus” of funds to deal with the coming recession, the priority should be the citizenry, not the salaries of “public servants.””
Evidently you don’t think that anyone that works for the state is a citizen of the state, i.e. they should not benefit as state citizens, i.e. they should be low to unpaid servants? It also appears you don’t think we the people that empower the state through the legislature/governor, do anything worthwhile for the citizens of the state!
YOU may be the government but I’m not.
Really? Not an American Citizen, don’t vote, not on the Minnesota census, don’t pay taxes, no drivers license, no Social Security or Medicare etc. etc.? So why care what happens with the MN surplus, since you aren’t a member of the state, its not your money anyway, right?
“Fully funded education” Does that mean they wont be looking for more money next time?
If you create more government this time means you have to pay for it in the future. So many programs at the state, county, and city levels were funded by one time COVID money, what happens in a couple of years when that runs out?
With the economy being very unstable, should we be committing to all this spending? In a couple years, there will be wailing and gnashing of teeth with the budget shortfalls and for some reason, government never gets smaller.
Is anyone going to actually watch where the money is going? Feeding Our Future?
Yeah… no budget is forever… when or if they need more money in the future they’ll probably ask for it… kinda like law enforcement, militaries, and highways. Funny how that happens eh? If only we lived in “magic land” where all budget were permanent and everything was free.
Speaking of fiscal oversight… when government officials discover fraud and prosecute it… that’s NOT actually and example of poor oversight or lax supervision. Poor oversight and lax supervision is when no one ever gets caught or prosecuted.