Minnesota's budget forecast shows improvement, $3.7B surplus projected
ST. PAUL, Minn. (FOX 9) - The state of Minnesota’s finances have improved over the last few months, but state economists are still warning legislators to be cautious about spending.
The state got an unexpected surge in revenues, mostly because corporations made a lot more money and will have to pay more taxes.
That buys some time, but current spending revenue levels would lead to a deficit in the next decade. So the state of Minnesota’s economy is strong, at least for now.
Massive investments in K-12 education and transportation followed a record-setting $17.5 billion budget surplus in 2023. Democrats wrote a $72 billion, two-year budget with tax credits for low-income families and tax increases for the wealthy. But because a lot of that spending came from the surplus, it’s not permanent and state economists warned lawmakers Thursday the increases are not sustainable.
"In order to protect the investments that were made in programs that serve Minnesotans it will be important that policymakers exercise caution in enacting additional ongoing spending," said Erin Campbell, Commissioner of the Minnesota Management and Budget.
The MMB is forecasting a $3.7 billion budget surplus by the end of fiscal year 2025 and $2.2 billion after 2027. That’s money still in the bank, but with spending higher than revenue.
"When you look at your family budgets, if you are spending more than you are actually taking in, that results in a future deficit," said House Minority Leader Lisa Demuth, R-Cold Spring.
Republicans say the DFL went on a reckless and irresponsible spending spree last year, and it’s leading the state into the red.
Gov. Tim Walz disagrees. He says the state is generating more revenue because of the recent investments as well as new laws on social issues like abortion rights and guaranteed medical leave. But he’s preaching restraint. The MMB projected about $980 million in borrowing this year and the governor wants legislators to keep their spending near that level.
"We have some more space in there on bonding and I assume that they will want to do that because these are important projects," said Gov. Walz. "But we’re still going to stay in that, I think, focused and narrow space."
"I told our bonding chair (before the forecast), 'Don’t count on any cash'," said House Speaker Melissa Hortman, DFL-Brooklyn Park. "He would like some cash now."
The governor's January budget called for $830 million in borrowing and $152 million in cash spending. He says he’ll release a new suggested budget in a couple of weeks.
As for bonding, which is another way to say borrowing, that can only happen with Republican votes, so even though they’re the minority in both houses, they’ll have a say in where the spending goes, if it goes anywhere at all.