Minnesota Report
The numbers of the 2024 February Revenue Forecast provide a favorable outcome for the Governor Tim Walz (DFL-MN) Administration. As stated in the summary on the MMB website, “Minnesota’s budget and economic outlook has improved since November. The 2024-25 biennium is now projected to end with a surplus of $3.715 billion, an increase of $1.324 billion compared to November projections. The near-term economic outlook has improved, with growth expected to persist through 2027. Higher collections so far this fiscal year raise the current biennium forecast for all major tax types. Corporate tax revenue shows the largest change, driven by higher-than-expected corporate profits through the forecast horizon. Spending estimates are largely unchanged from November. The higher revenue forecast throughout the FY 2024-27 planning horizon results in improvement to the structural budgetary balance, but spending is still projected to exceed revenue through FY 2027.”
As the headline in Governing Magazine states, “Minnesota Officials Urge Fiscal Caution Despite $3.7B Surplus.”
This means there is no need for any dramatic course correction, and as Walz said himself, “We will continue to follow our focus.” The projections largely support a structural balance, with some apprehension for the out years. This note of caution, is warranted because the economic outlook is somewhat tenuous, because of Vladimir Putin’s War on Ukraine and the Israeli conflict in Gaza, as well as the questions over the our nations relationship with China. It is global affairs which provide the variables in the nation’s economy, but here in Minnesota, where we regularly outpace the bulk of other state’s economically, in fact, Walz called attention to Minnesota’s leap ahead of Texas, which waas first called attention in July of 2023, Minnesota ranked as a top state for businesses, surpasses Texas.
What seems to be the worthy conclusion is the $3.7 billion surplus is on the bottom line a result of stable spending. The feature that undermines the criticism of the Republican rhetoric is Corporate Taxes are at an all time high. Walz in noting the factors that led to this economic benefit acknowledged his “incredible partners” (the DFL controlled legislature) and the positive policy positions along with the funding mechanisms put in place.
He placed focus of this legislative session as “Rebuilding Infrastructure and the changing in the budget as proving, “more space for bonding.” He also conveyed his intent to provide a supplemental “spending budget in a couple of weeks,” and also said, “we will stay close to the numbers we have now.”
Traditionally, we would ask our standard question about the state’s debt capacity, an due to an issue with the Governor’s staff we decided to forgo this, but we secured the information later from the department and received the Debt Capacity Forecast.
Here we will highlight the state’s guidelines:
1. Total tax-supported principal outstanding is 3.25% or less of total state personal income.
2. Total amount of principal (both issued, and authorized but unissued) for state general obligations, state moral obligations, equipment capital leases, and real estate capital leases are not to exceed 6% of state personal income.
3. 40% of general obligation debt is due within five years and 70% within ten years, if consistent with the useful life of the financed assets and/or market conditions.
Specifically, regarding capital investment with the $980 million for bonding as the upper-bound, the actually bond sale, could be even more beneficial if the interest rates begin to fall and in effect become a recognized vehicle for job growth.
We gleaned to themes from this press conference, which were a continuation of the idea of Minnesota being “The Best Place to Raise a Child” which is dovetailed with the Explore Minnesota tourism campaign, “Star of the North“.
One other factor Walz called attention to was the Alabama Invertro Fertilization decision and how Minnesota was likely to use this a way to differential our state from others.
As the legislative leaders took their turn, House Speaker Melissa Hortman (DFL-34B, Brooklyn Park) and new Senate Majority Leader Erin Murphy (DFL-65, St Paul) enthusiastic supporters of the stability of our state’s financial future and Hortman emphasized the legislative work saying, “We will continue to work on cutting costs in child care, housing and in health care.” She further stated her caucus will prioritize workers because “workers are the key to a long-term stable economy,” further saying “Minnesota workers outpace the nation in terms of their productivity…and they are our priority at the legislature.”
She also let the room know that they had a nickname for the Governor’s Cabinet Room, called “Hotel California.”
In her comments, Murphy referred to the economic outlook as a “Durable Budget,” and lauded the senate work the upper body applied to the legislative work.
In the Question and Answer segment of the presser, Hortman was asked about the fact with 53 members of her caucus being new and thus having no experience being in the minority if they were likely to effectively overreach? She acknowledged, the relative institutional “youthfulness of her caucus” but gave no indication she lacked faith in their collective mindset.
Later, a question was asked about whether MN Care should have a opublic option, and Murphy, a nurse fielded that question, saying, “People have coverage, but can’t afford their care.”
The question delved into tax rates and Hortman spoke of how the entirety of the state benefited from the dispensation of LGA (Local Government Aid) and CPA (County Public Aid). She also commented about the in migration to Minnesota in result of the Dobbs decision, IVF decision and the state of abortion politics in general.
The Republican Response
In general, when we heard the opening remarks from House Minority Leader Lisa Demuth (R-13A, Cold Spring) it was a d`eja’vu moment as a blast to the past, with the rhetoric of tax and spend Democrats leading into a Boom and Bust Economy. To which we will say, no that was the tax cuts of the Jesse Ventura Administration and the following Tim Pawlenty Administration that saw perpetual deficits. What is more applicable to a Boom and Bust Economy than that?
Her conjecture of the pending structural deficit due to an expenditure of $1.5 Billion than the statew would be taking in also expects a poorer performing economy, of which Minnesota has proven just the opposite.
Senate Minority Leader Mark Johnson (R-01, East Grand Forks) echoed Demuth’s thoughts but offered up nothing more in the way of anything novel or unique. It felt like a Back to the Future experience.