Gov. Tim Walz said Thursday he expects next week’s official state economic and revenue forecast to be stable, meaning that the large state budget surplus will survive instabilities and worries about the economy.
That would mean that roughly $12 billion will still be available for the 2023 Legislature.
Walz said that while he is reluctant to “forecast the forecast” that will be released Tuesday, he said indications are that the state economy remains strong. Tax collections since the last forecast have exceeded expectations, though the state’s economic adviser is now expecting a recession to hit the nation.
“It really seems like Minnesota has been relatively stable,” Walz said. “We’re seeing the numbers that show we’re relatively stable.”
“I suspect this will come in status quo,” he said.
Walz, speaking at an event marking $2.4 million in additional grants aimed at creating 2,700 child care slots around Minnesota, said he wanted to be careful, though not overly cautious, about the state’s finances.
“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. But being cautious and prudent is not an excuse for not making the investments that are fundamental to the growth of that economy.
“We can’t get so nervous and so cautious that we’re not willing to fund our child care because we’re thinking about what can happen because that becomes a self-perpetuating loop of spiraling down,” Walz said. “Same is true of education. We’re not talking about not doing transformational change when we have record surpluses. We’re just asking that we be thoughtful about long-term commitment.”
The next forecast will guide the early days of the session but it is the forecast released in February that will be the official guide to how much can be spent when a budget is adopted in the spring. That big surplus is on a base budget of $52 billion over two years. The surplus covers the last six months of the 2021-23 budget and the next two-year budget that begins July 1, 2023.
Walz is used to being asked about the potential for a special session, something that has been possible though not likely since the regular session ended in May with most budget and tax work not completed. When he wasn’t asked Thursday, Walz joked to reporters “No special session. No special session.”
The DFL governor then added that it’s not as though he hasn’t been asked by some lawmakers, hinting that it was GOP lawmakers.
“Funny how they now want the deal they made last May,” Walz said. That is a reference to a bipartisan House-Senate deal to divide the surplus into thirds with one-third going to tax reductions, one-third to program spending and one-third into reserves. When the pieces of that deal couldn’t be agreed to by lawmakers, Senate GOP leaders said it expired with the end of the regular session and rebuffed calls for special-session negotiations.
The 2023 session begins at noon on Jan. 3.