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State economists: Minnesota finances stable with record-breaking surplus intact

But an apples-to-apples comparison between November and February would show that the state surplus actually grew to $19 billion, due to higher-than-forecast collections of individual income taxes and corporate franchise taxes and the impact of those improvements going forward.

Minnesota State Capitol
Minnesota State Capitol
MinnPost photo by Peter Callaghan

Minnesota’s budget office reported Monday that the state’s record-breaking surplus is slightly less record-breaking than it was in November — that the previous surplus of $17.6 billion is now only $17.5 billion.

But that would not be an accurate picture of what the updated economic and revenue forecast will reveal when the entire report is released later Monday.

An apples-to-apples comparison between November and today would show that the state surplus actually grew to $19 billion, due to higher-than-forecast collections of individual income taxes and corporate franchise taxes and the impact of those improvements going forward.

But because the DFL-controlled Legislature passed a bill last week to show inflationary impacts differently — moving them from an item at the end of the forecast documents into the program-by-program spending totals — the surplus is shown lower than it would have been before this law change. 

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In addition, the Legislature has appropriated more than $100 million in spending on a bill to align state tax code with changes in the federal code and to provide additional criminal prosecutors to the state attorney general.

In a toplines release Monday morning, the Minnesota Management and Budget office described state finances as stable, while at the same time reporting the more-robust-than-expected tax collections. Those have been hinted at since the November forecast with actual money-in-the-bank collections increasing by $487 million in just two months.

Also in January, the state’s macroeconomic consultant — IHS Markit — upgraded its projections of economic growth over the period covered by this new state forecast.

Combined, the forecast was likely to reflect higher-than-last predicted tax collections.

The state spends about $2.1 billion a month from its general fund. In addition to any surpluses, the state has a fully topped off rainy day savings account totaling $2.65 billion.