NEWS: The Reasons We Have a Minnesota State Budget Surplus

Rep Julie Sandstede of Hibbing responded to community questions during an online town hall meeting on Saturday, March 12, about things including the budget surplus and housing.

Minnesota’s General Fund surplus, announced in late February at $9.25 billion by the Minnesota Management and Budget, will fluctuate depending on the impact of the conflict in Ukraine on energy and commodities, any resurgence of the pandemic, and other variables.

Some of the surplus is due to reduced spending in education (down $158 million) and health and human services (down $108 million).

Some of the surplus is due to government assistance during the pandemic that enabled personal incomes to rise and consumer spending to increase.

A significant part of the surplus also is due to an economic boom for many companies during the pandemic. Those corporate profits translate into additional taxes that can be estimated as available for 2024-25 spending.

Budget officials in the latest forecast indicated the state is projected to take in $57.3 billion through June 30, 2023, while spending $51.7 billion. For the 2024-25 biennium, revenues are expected to rise to $60.6 billion and spending to $54.3 billion.

The forecast, said House Speaker Melissa Hortman (DFL-Brooklyn Park), means that “Minnesota’s economy is doing well, at least at the surface level, with corporate profits continuing to wildly outpace expectations. Now it is our job to address the challenges that people are facing and ensure that workers and families are benefiting from the economic growth they are helping create.”

Although a lot of money has been spent on the pandemic fight, much of that came from three interventions by the federal government that provided billions of dollars for extended unemployment, business grants, stimulus checks, money for hospitals and childcare. That took the burden off of state programs nationwide. California, for example, currently shows a budget surplus of $31 billion.

Mark Haveman, executive director of the Minnesota Center for Fiscal Excellence, a nonprofit that analyzes state spending and taxation, said in a MinnPost article that the statistic that “absolutely blows my mind” is that personal income grew in 2020, during the heart of the pandemic, to its highest level in 20 years.

A lingering concern, however, is that Minnesota public school enrollment is down by a few thousand students, which leads to reduced funds for many school districts.

At an online town hall meeting with Hibbing’s Rep. Julie Sandstede on March 12, she was asked about the surplus.

“This historical surplus is really from large corporations, large businesses, having outstanding years. The S&P 500 last year grew 22 percent in the fourth quarter and saw an over 50 percent increase in 2021,” she noted. “While many of us were struggling during Covid-19, some companies were thriving with historical gains. That is probably where the majority of our surplus came.”

Minnesota Women’s Press asked Rep. Sandstede about what the conversations are in the legislature about supporting community housing developments that also address the mental well-being of residents — something Hibbing is in the process of building.

Sandstede noted that she does not sit directly on committees related to public heath and housing, but “the need in the conversation is familiar to all of us. Housing issues across the state are a major issue, and when you mention special needs [mental health, substance use recovery, developmental, disabilities, elderly] those areas of housing are even less available, [especially] as you get into Greater Minnesota. The area of mental health as a whole is something we are hearing about in pretty much every committee, whether you are in education or health or public safety.”

The conversations about making investments in different types of housing is “very alive and they are trying to be addressed through different committees. We are making progress — not often as fast as I would like to, but we are making progress.”

Minnesota State budget details

Budget forecast 

News conference