The latest state revenue report suggests local government aid payments scheduled for December will be paid in full.
Revenue collections for the month of October again exceeded the forecast reported in the special May interim state budget projection, according to Minnesota Management and Budget’s (MMB) monthly revenue review.
The May budget projection indicated the state was facing an immediate fiscal year (FY) 2021 deficit of $2.426 billion.
When coupled with the state’s budget reserve of $2.359 billion, the positive collection report provides city officials some reassurance that the full distribution of the December local government aid (LGA) payment will be made. This takes away one piece of uncertainty as cities finalize their 2021 budgets.
October collection details
For the month of October, net state general fund revenues totaled $1.960 billion, which is $212 million (12.2%) more than projected in May. Receipts from net individual income tax (+$109 million), sales tax (+$109 million), and corporate tax (+34 million) were all greater than projected, while the category of “other state general fund revenues” was $39 million lower than projected.
For the first four months of FY 2021, state general fund receipts total $7.231 billion, which is $805 million (12.5%) more than projected.
The October revenue report cautions that monthly revenue variances should be interpreted with great caution because significant variances may be caused by variations in the rate at which receipts are received and processed and differences in the rate at which refunds are issued.
November budget forecast
The May projection also reported a state general fund deficit of roughly $4.7 billion for the upcoming 2022-2023 biennium, which begins on July 1, 2021. In November, MMB will release a state budget forecast that will update the state’s budget status for that period and provide lawmakers with the first full assessment of how the pandemic has impacted revenues and expenditures.
When the 2021 legislative session begins on Jan. 5, Gov. Tim Walz and legislators will begin their work to craft a state budget that will address any 2022-2023 deficit. LGA paid to cities in 2021 is funded from the state’s 2022 fiscal year.