ST. PAUL – A new economic forecast for Minnesota projects a state record $7.7 billion budget surplus for the next two-year budget cycle, a $9 billion turnaround from one year ago.
An updated Minnesota Management & Budget projection was issued Tuesday. It indicates “strong growth in income, consumer spending and corporate profits drove extraordinary revenue growth in FY 2021, and higher tax receipts to date in FY 2022 combine with an improved outlook for income, consumer spending and corporate profits to raise the revenue forecast for the current biennium.”
State Rep. Dean Urdahl, R-Acton Township, said this presents an opportunity to provide Minnesotans with massive tax relief during the 2022 session.
“This is a significant improvement from the earlier stages of COVID-19 when there were grave concerns our state economy was going to come crashing down,” Urdahl said. “That said, this surplus of nearly $8 billion also represents a significant over-collection of state taxes and relief needs to be a top priority in the 2022 session. These dollars could help offset increased costs people are suffering under inflation and should be put back in taxpayers’ hands. This includes relief from state taxes on Social Security income and veterans’ pensions.”
Urdahl also said the surplus dollars also should be used to spare Minnesota businesses from suffering a tax increase that is scheduled to land Dec. 15. Record-setting unemployment claims depleted Minnesota’s Unemployment Insurance Trust Fund, resulting in a debt of more than $1 billion to the federal government that is coming due.
“Minnesota is one of only 10 states that has not taken care of this issue and our state’s lack of action could cause businesses to face a UI tax increase of 15 percent or more to replenish the fund,” Urdahl said. “This should not happen any time, much less when the state has an unprecedented surplus. Our small businesses have been through the wringer the last couple of years and we should lift this burden from them as soon as possible.”
The MMB report also indicates the improved budget forecast “triggers a statutory allocation to the budget reserve, leaving the reserve balance at $2.656 billion. While economic uncertainty and the pandemic pose significant risk to the forecast, the improved outlook carries into FY 2024-25 planning estimates.”
The $7.7 billion surplus follows a $1.3 billion shortfall projected in December of 2020 and a $1.6 billion surplus predicted last February.