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Hello from St. Paul,
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Minnesota?s economists have released their latest fiscal projections for current and future budget cycles. The data finds both positive and negative trends.
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The current budget cycle finds a budget surplus, yet in the next budget cycle a deficit by an almost identical amount would need to be addressed.
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For the 2024-25 biennium, the Minnesota Management and Budget (MMB) Office says Minnesota is now projected to see a budget surplus of $2.4 billion, which is up $808 million from the end-of-session estimate. Higher than expected consumer spending and corporate profit growth are the main reasons for the tax revenue forecast. The near-term U.S. economic outlook has improved since February, driven by stronger than expected consumer spending, business investment, and employment.
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However, higher estimates in health and human services and education raise the total amount of spending, which MMB believes will create a negative structural balance in the next biennium. According to the data, Minnesota is now projected to see a $2.3 billion budget deficit in Fiscal Year 2026-27.
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State spending increased significantly after the legislative majority and Governor Walz agreed on a budget. Last session, Minnesota had a nearly $20 billion budget surplus before inflation was automatically included in our state?s budget forecast projections. In addition to spending the surplus, the majority party also voted to raise taxes by another $10 billion. By the time session ended, Minnesota?s budget spending increased by 40% when compared to spending in the previous two-year budget cycle.
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While the November forecast gives lawmakers an updated roadmap for Minnesota?s economic projections, an update given this February will serve as the official fiscal legislative framework for the 2024 session.
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Talk to you soon,
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Joe
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