The Minnesota Management and Budget Agency announced today that Minnesota is facing a $2.426 billion deficit for the current biennium.
Before the COVID-19 pandemic, February’s forecast projected a surplus of $1.53 billion.
Revenues are expected to drop by $3.611 billion while spending (counting appropriations since February) is expected to jump by $391 million.
The state has a $2.35 billion budget reserve, and $2.18 billion from federal funding from the Coronavirus Aid, Relief, and Economic Security (CARES) Act.
Currently, that money can’t be spent on items originally accounted for in the state budget.
Gov. Tim Walz said that hard decisions will have to be made, but didn’t specify items that will be cut.
When asked about state worker layoffs, he said the cost of all state workers only made up about 7 percent of the state budget, with health care and education filling the majority of expenditures.
“At this point of time, we have to leave everything on the table,” Walz said of possible budget cuts.
The Coalition of Greater Minnesota Cities said in a press release that city officials have “deep anxiety about the potential for lost revenue from reduced property tax collections, fees and local taxes.”
The group said Local Government Aid payments, scheduled in July and December, are vital to supplement stretched city budgets.
Senate Majority Leader Paul Gazelka, R-East Gull Lake, said the Senate Rules Committee froze salaries on their employees today and will likely enact a hiring freeze this month.
He said the rest of the state should do the same.
“The next most responsible move for state government is to renegotiate the second year of state employee contracts so thousands of state workers won’t face layoffs from budget shortfalls in the 2021 budget,” Gazelka said in a statement.
“We need to say, ‘no’ to any new spending increases that won’t be reimbursed by the federal COVID relief funds or help us reopen the economy. And we must exercise caution when it comes to the bonding bill because every $100 million in borrowing costs the state $142.72 million in debt service over the next 20 years.”
Americans For Prosperity-Minnesota State Director Jason Flohrs said that the government should focus on reopening the economy and spending money on essential services.
“With just under two weeks left in the session, lawmakers should identify unnecessary spending and refocus funding on essential and necessary services,” Flohrs said in a statement.
“Minnesota is already one of the highest taxed states in the nation. With recent state spending increases annually exceeding economic growth, now is the time to reevaluate and reprioritize, rather than looking for more revenue to cover the cost of business as usual.”
