Although state revenue collections were down, funding for city programs — including local government aid — are not likely at risk.
State revenue collections for January were $2.295 billion, which is $228 million (9%) lower than projected, Minnesota Management and Budget (MMB) reported on Feb. 10.
Net tax receipts from individual income taxes, corporate taxes, and the broad category of “other taxes” were all below forecasted levels. Meanwhile, net sales tax receipts were higher than forecast.
Although state revenue collections were down for the month of January, funding for city programs — including local government aid — are not likely at risk. The state budget includes more than $2 billion in budget reserve funds, which provides a strong cushion should revenue collections continue to underperform.
FY 2020 receipts down slightly
The weak monthly collection report follows a strong collection report for the months of November and December of 2019, where collections exceeded forecast by $155 million.
For fiscal year (FY) 2020, year-to-date receipts are now $13.212 billion, which is $76 million (0.6%) less than projected in the state budget forecast released in November.
Budget forecast: false positive?
The state’s November 2019 Budget and Economic Forecast projected a positive state budgetary balance of $1.33 billion for the balance of the current FY 2020-2021 biennium.
However, much of the projected balance was due to a stronger-than-projected carry-forward from the previous biennium and not an ongoing structural balance. As a result, many legislators have expressed caution about enacting additional, ongoing spending commitments.
Next budget forecast coming soon
The MMB will release the next full state budget forecast on Feb. 27. The Legislature and governor will base any adjustments to the enacted state 2020-2021 biennial budget on that budget forecast.