ST. PAUL, MN — Thursday in St. Paul, a near $500 million drop in the projected surplus hit lawmakers.
“This is no surprise,” said Gov. Tim Walz.
The state’s budgeting department blamed the drop on slowed economic growth and lower tax collections for dropping $492 million dollars off of budget projections for fiscal years 2020 and 2021.
“Those are not the numbers I’d prefer to see, but they are numbers we can manage and work within,” said Myron Frans, Commissioner of Minnesota Management and Budget
So, what does that mean for the fiscal future of the state?
Basically, it means the state has less money to play with. Imagine if your own paycheck was 30% less than you budgeted for but still enough to pay your essential bills.
“The key here is understanding that we’re in a positive situation. But we need to be cautious about how we proceed,” said Frans.
Which is where a fissure between the Republicans and Democrats starts to form.
Senate Majority leader Paul Gazelka saying, “the last thing we should do is add permanent spending commitments to the state budget.” He added, “…in order for the economy to grow, we need to be careful about any new tax increases foisted on the very people who will drive our economy in the future – the middle class.”
This latest number could force Gov. Walz to revise some of the plans he laid out in his budget proposal.
But Gov. Walz said what he has proposed in his $49-billion budget plan, some of which include long term tax increases, will keep the economy chugging along.
“At this case in time, we are cutting taxes for working Americans–for the working Minnesotans that are in the middle. But we’re making strategic investments that grow the economy. I am not going to turn away from this,” said Walz.
While Gov. Walz has laid out an aggressive spending plan for his 2020 and 2021 budget, he did leave nearly $800-million open on the bottom line. He said that was done in anticipation of the projected surplus shrinking.
“Now is the time to continue to protect the budget reserve and the general fund, and help grow our economy with strategic investments in health care, education, and prosperity,” said Walz.
Republican Senator, and Chair of the Senate Finance Committee Julie Rosen. said in a statement Thursday, “..our finance chairs will begin putting together the next budget using our four principles – taking care of people, protecting the taxpayer, controlling spending and getting it done on time…”
Budget experts aren’t calling this a recession, just a slow-down, which they expect to continue into 2023.