Budget Surplus
Submitted by Michael Mollner, Government Affairs Associate, Christopherson Advocates
Minnesota lawmakers are gearing up for their upcoming session with a substantial financial windfall of $2.4 billion. This welcome surplus is the result of the last two-‐year budget cycle, which concluded with an $820 million surplus due to higher-‐than-‐expected revenue collection and lower spending than initially projected. This additional $2.4 billion will be added to the $1.6 billion surplus already projected for the current budget, which extends through June 2025. The State Economist, Laura Kalambokidis, has highlighted Minnesota's economic resilience and the trend towards more stable budget forecasts, moving away from the turbulence witnessed during the peak of the pandemic.
While $2.4 billion may seem relatively modest in comparison to the state's massive $72 billion two-‐year budget, it closely mirrors the budgetary fluctuations experienced before the pandemic. Just prior to the pandemic's onset in February 2020, Minnesota anticipated a $1.5 billion surplus, which shifted to a $2.4 billion deficit by May 2020, only to rebound to a $636 million surplus by December 2020. In the current spring, lawmakers faced an extraordinary $17.5 billion budget surplus.
This sizeable surplus offers the DFL in control of the state government, greater flexibility for the upcoming session. This session typically revolves around discussions regarding a package of construction projects. In the last session, Democrats implemented a comprehensive list of progressive policy priorities and enacted the largest two-‐year budget in Minnesota's history. Many of these policies, especially those focused on child care and housing, are still in the initial stages of implementation and will take time before their full effects are realized.
On the other side of the political spectrum, Republicans in the House and Senate are advocating for tax relief. They argue that Democrats have significantly increased spending by 40% and raised taxes in the current two-‐year budget, making tax relief the primary utilization of any surplus funds. Additionally, the state maintains substantial reserve accounts, with reserves amounting to nearly $2.9 billion, along with a rainy day cash flow balance of $350 million. House Minority Leader Lisa Demuth highlights the importance of safeguarding the interests of taxpayers and practicing fiscal responsibility. The surplus, while substantial, comes with ongoing uncertainties, prompting some lawmakers to exercise caution and suggest that a portion of the surplus be retained as a financial cushion for the future.