From surplus to deficit? Minnesota budget forecast Tuesday sets stage for legislative session’s final 2 weeks

Tuesday’s billion dollar question: Will Minnesota face a sudden budget deficit after expecting a $1.5 billion surplus just weeks ago? 

The state budget office — known as Minnesota Management and Budget or MMB — is preparing to publish a budget forecast Tuesday, required by law for lawmakers to tap into a $2.4 billion budget reserve. Crafted in 2014, the reserve law was intended to create a bigger rainy day fund for the Legislature to use to plug any budget holes during an economic downturn. 

The economic indicators have been grim in recent weeks. Unemployment claims are approaching 600,000, surpassing previous records during the Great Recession. Minnesota’s tax revenue collected in February and March totaled $2.6 billion, roughly $103 million — or 3.8% — less than projected in late February, according to an April 10 update from MMB. 

Myron Frans, budget chief for two Minnesota governors, has warned a deficit is looming. 

The budget forecast will set the stage for the final two weeks of the 2020 legislative session, which started with vastly different priorities for Gov. Tim Walz and the House DFL and Senate GOP caucuses. To limit the spread of coronavirus, both chambers and both parties have curtailed their ambitions to pandemic-related issues only. 

But key differences remain: House DFLers are prioritizing financial assistance to renters of $100 million, more than three times what Senate Republicans are proposing. Senate Republicans are also pursuing tax deferments for small businesses, tax credits for business investors and tax exemptions for Minnesota businesses who received Payroll Protection Program loans if those loans are forgiven.

Recently-negotiated state employee raises are another sticking point, with Republicans in opposition to the raises.

House Minority Leader Kurt Daudt, R-Crown, further complicated the end-of-session picture by threatening to block a public works bill unless the governor relinquished his emergency powers.