The biggest political news of the week came on Monday with the release of the February budget forecast. Any budget changes the Legislature makes must be based on this forecast. Due to its significance, this week’s Top Five is fully dedicated to the updated forecast and brought to you by former Minnesota Management and Budget (MMB) Commissioner, and now Winthrop’s own, Tom Hanson.

Summary

The November 2021 forecast predicted a general fund surplus of $7.746 billion for the current biennium. Citing stronger revenue growth and lower spending estimates, the February forecast increases the surplus by $1.507 billion. The total FY 2022-2023 biennium surplus is now projected to be $9.253 billion.

Economic Update

According to the February forecast, the U.S. economy continues to recover from the recession that was caused by the COVID-19 pandemic and the unemployment rate has fallen to near pre-pandemic levels. Economic growth is expected to continue while home values, financial asset values, and corporate profits continue to rise. Nevertheless, the February forecast does strike a note of caution by citing concern over inflation, supply chain disruptions, labor force participation, geopolitical conflict (the Russian invasion of Ukraine), and the path of the pandemic.

Revenues

Total general fund revenues for the current biennium are now expected to be $57.289 billion, an increase of $1.252 billion over the November 2021 forecast.

Expenditures

Expenditures in the current biennium are now expected to be $51.729 billion, a reduction of $270 million. The decrease is primarily driven by changes in E-12 education and health and human services spending.

2024-2025 Estimates

In the next biennium, the February forecast predicts that, based on current law, revenues will exceed spending by $6.289 billion. This is a $729 million increase from the $5.56 billion projected in the November forecast.

March 4, 2022