Despite present surplus, Minnesota still faces projected long-term deficit

Reader's wouldn't know from the headlines that Minnesota is actually headed towards a projected $1.273 billion deficit. 

State Capitol Building/Minnesota Department of Administration

As Minnesota media and legislators praise a projected short-term surplus, many ignore a much larger, long-term shortfall.

Seemingly good news broke Tuesday as the Minnesota Department of Management and Budget (MMB) announced a surplus “of $641 million for the FY 2020-21 biennium,” an improvement from the $2 billion deficit predicted in May.

This announcement triggered optimistic responses from politicians like Gov. Tim Walz, who attributed the surplus to “the resiliency of Minnesotans.”

In reality, the excess money is owed to the fact that revenue from “all major tax types” is higher and spending is lower than in May, when the last budget forecast was released.

The governor and most headlines also fail to mention that the MMB predicted a “$1.273 billion budgetary shortfall” for the 2022-23 biennium, which begins in July 2021. The department said that “Minnesota has 184,000 fewer jobs than in February and, while the economic downturn has affected all Minnesotans, unemployment has disproportionately impacted lower wage workers.”

“Even though we had a $641 million news today of a budget surplus, we still have a serious problem in our budget,” Senate Finance Committee Chair Julie Rosen, R-Fairmont, said in a video statement. “The Senate Finance Committee will be looking into government, government spending [and] government accountability and seeing where this money is going, because actually our budget is unsustainable.”

Meanwhile, some legislators on both sides of the aisle agree that the projected surplus should be used to dispense aid to business owners who are struggling amid the state’s coronavirus shutdowns.

State Rep. Steve Drazkowski, R-Mazeppa, said the projected deficit for the next biennium is “more evidence of Gov. Walz’s failed leadership.”

“His policy of repeatedly shutting down our state is undoubtedly harmful and ill-advised. Today’s projections prove as much. Before this pandemic started, our state maintained a budget surplus of roughly $1.5 billion. Now, our budget surplus has shrunk to $641 million, and we are staring down a $1.273 billion deficit over the next two fiscal years,” he said.

“Families and businesses across our state have been absolutely crushed by this pandemic and the governor’s dreadful economic shutdowns. The loss of state revenue we see today is a direct result of shutting down business. If Gov. Walz had supported businesses, then we would not have this problem. Instead of allowing individuals to make a living, government has only added to their burdens,” he added.

Drazkowski said he fears Walz will ask Minnesotans “to pay for a disaster they did not cause” by calling for tax increases.

Jake Duesenberg, founder of Action for Liberty, also published an analysis of the budget situation — and his findings contradict the prevailing narratives.

“Government is lying to you — there’s no budget deficit,” Duesenberg writes. He backs up this claim by highlighting how “no budget has been enacted yet” for the 2022-23 biennium. The MMB simply assumed a spending increase when calculating the upcoming shortfall.

The result of crafting policy under the MMB’s current predictions, Duesenberg says, is that Democrats will push for more taxation to compensate for the deficit while Republicans will attempt to cut spending.