State Budget Surplus Now More Than $9 Billion

Posted on March 3, 2022 by Jeff Bostic

The Minnesota Office of Management and Budget (MMB) released the February budget forecast earlier this week. This budget will guide lawmakers as they determine their spending priorities in the current legislative session. Since the last forecast in November, the budget surplus for the two years ended June 30, 2023, has grown by $1.5 billion to a historic $9.25 billion.

Most of the growth is due to projected increases in state revenue ($1.25 billion), but MMB is projecting a modest decline in projected spending as well. While some of this surplus is being considered "one-time money" by policymakers, the state is currently projecting a significant surplus of over $6 billion in the two years beginning July 1, 2023.

The Department of Human Services (DHS) projects a decline in spending of $108 million compared to the forecast in November. That is primarily due to the most recent extension of the public health emergency, providing the state with another quarter of enhanced federal Medicaid match of 6.2%.

On the cost side, nursing home spending increased from the November forecast. That is because of the reactivation of the emergency program under MN Statutes 12A.10. Additionally, an initial review of 2020 cost reports indicated that cost increases are higher than previously estimated, which will increase spending on 2022 rates.

The unprecedented state surplus, which includes an apparent substantial structural surplus into the two years starting July 1, 2023, offers an opportunity for legislators to address the staffing crisis that is a huge problem for long-term care providers. The Long-Term Care Imperative will continue pushing for the full implementation of cost-based elderly waiver rates and a significant investment in permanent wage increases for care centers. Both measures will allow providers to make the investments needed to address recruitment and retention efforts in the extremely challenging workforce environment.