REGIONAL- A state budget surplus once pegged at $7.7 billion has soared to a historic record of $17.6 billion for the upcoming biennium starting in 2023, giving the DFL-controlled Minnesota …
REGIONAL- A state budget surplus once pegged at $7.7 billion has soared to a historic record of $17.6 billion for the upcoming biennium starting in 2023, giving the DFL-controlled Minnesota Legislature and Gov. Tim Walz an unprecedented opportunity to shape budget and policy changes for years to come.
“Today’s news is proof that Minnesota’s economy is strong and growing,” said Walz on Tuesday after the announcement of the surplus was made by the state’s Management and Budget Office (MBO). “The case for sending money back to Minnesotans to help with rising costs has never been stronger. Together, we have a golden opportunity to do that while also investing in our workforce, our schools, and our kids – all while lowering costs for our middle-class families, small businesses, and seniors.”
While Walz said he remains cognizant of future economic uncertainties, he intends to move decisively to allocate funds for present and future needs.
“Being cautious and prudent is not an excuse for not making the investments that are fundamental to the growth of that economy,” Walz said.
The $17.6 billion surplus includes approximately $12 billion in carryover funds from the current budget year.
The 2022 Legislature, with the House controlled by the DFL and the Senate controlled by Republicans, convened last January with a projected $7.7 billion surplus that ballooned to $9.25 million in February. While the parties reached a tentative agreement in May to use $4 billion for tax cuts, they remained deeply divided over other issues and ended the session without a deal, leaving the $9.25 billion untouched for the next legislative session. Increased tax revenue and decreased expenditures account for the balance of the carryover.
Walz, who will reveal his budget plan in late January, is expected to again propose rebate checks for Minnesotans, as opposed to widespread tax cuts. Increased funding for education and child care, additional local government aid, and a possible tweak to the Social Security tax are also anticipated priorities for Walz.
House Speaker Melissa Hortman, DFL-Brooklyn Park, staked out issues surrounding the workforce as priorities for spending the surplus.
“A workforce shortage is constraining our economic growth, making it even more important that we focus on things that help Minnesotans enter and stay in the workforce — like job training, education, child care assistance, paid family leave, and more,” Hortman said. “It is also a time to roll out the welcome mat for people who choose to move to Minnesota and expand our workforce.”
A bonding bill for capital projects will be on the table in 2023, and it’s possible some of the surplus could be used to fund more projects than the bonding bill the legislature passed on this year.
But Republicans immediately reinforced their intent to lobby for tax cuts, an issue the party campaigned on for using the surplus when the projected amount was much smaller.
“Minnesotans are being massively overtaxed, and we should spend most of the next session working to give as much of it back to Minnesotans as possible,” said House Minority Leader Lisa Demuth, R-Cold Spring. “Tax hikes of any kind should be a complete non-starter. Families deserve their money back as they continue to deal with the high cost of groceries, home heating bills, and other everyday necessities.”
MBO will issue an updated budget projection in February which could adjust the projected surplus up or down.