Minnesota’s revenue collections remain stronger than expected, a positive sign for cities seeking assurance on state aid payments.
As the pandemic continues to impact the state, city officials concerned about local government aid payments have been closely watching the status of the state budget. The major task for the 2021 Legislature will be to enact a 2022-2023 state budget amid substantial economic uncertainty.
The state received positive budgetary news on Jan. 11 as Minnesota Management and Budget released the quarterly Revenue and Economic Update. According to the report, Minnesota’s net general fund receipts for the months of November and December 2020 are now estimated to total $4.098 billion, which is $167 million (4.3%) more than projected in the last full state budget forecast released in December 2020.
Strong revenue collections
The December state budget forecast had already reported substantially better budget news. A special budget update in May 2020 had projected a deficit for the remainder of the current biennium (ending June 30, 2021). However, due largely to higher-than-projected revenues, that deficit was erased, and the state was projected to have a positive budgetary balance of $636 million.
The Legislature reduced that positive balance to $393.5 million in December, during the seventh special session, when it enacted an additional pandemic relief bill. It appropriated $242 million, largely to provide assistance to businesses.
According to the Jan. 11 Revenue and Economic Update, net general fund receipts exceeded the forecast for sales, corporate, and other taxes, more than offsetting lower-than-expected net individual income tax receipts.
The 2022-2023 state budget
The previous state budget forecast released in December reported a deficit for the upcoming 2022-2023 biennium of $637.6 million. With the passage of the December special session pandemic-response package, the carry-forward balance from the current biennium was reduced, thereby increasing the deficit for the next biennium to $882.7 million.
The next full state budget forecast will be updated around March 1, and that forecast will serve as the basis for any short-term budget changes and for the upcoming 2022-2023 biennial budget.