State Budget Forecast Shows Increased Surplus
Posted on February 29, 2024 by Jeff Bostic
Earlier today, the Minnesota Department of Management and Budget (MMB) released the February budget forecast today, revealing an improved budget outlook compared to the previous forecast in November.
The current forecast highlights a surplus of $3.7 billion for the ongoing biennium starting July 1, 2023, surpassing the $2.4 billion projected in November. The surge in surplus is primarily attributed to rises in state revenue, notably corporate tax revenue.
Addressing structural deficits
The November forecast identified a “structural deficit,” the difference between projected revenue and projected expenses, that has developed for the biennium that begins on July 1, 2025. The projected improvement in the state revenue forecast does carry over into the second biennium. It is expected to reduce the structural deficit from $2.3 billion in the November forecast to $1.5 billion in the current forecast. Because of the size of the surplus for the current biennium, the state is projected to end the second biennium with a bottom line of $2.2 billion if the Legislature does not approve any additional spending.
Spending projections and areas of focus
Spending projections have changed very little from the November forecast to the one released today. One of the areas of cost increases that were called out in the forecast documents is the Community Alternatives for Disabled Individuals (CADI) program, which is now anticipating 2% higher enrollment growth over the next four years than was projected in November. Both nursing homes and Elderly Waiver show little change in the most recent forecast.
Implications for legislative action
The improvement in the state’s budget situation is good news. It gives the Legislature an opportunity to make additional investments using the available surplus funds, particularly in the current biennium. On the other hand, the structural deficit projected for the second biennium may influence the Legislature’s willingness to make additional investments during the current legislative session, particularly for ongoing commitments that would further increase costs in the next biennium. This is the final budget forecast released during the current legislative session, so whatever spending decisions they make this year will be based on these projections.
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