Decent News/Not-So-Good News. The Minnesota Department of Management and Budget released the November budget forecast today and it didn’t contain much in way of surprises. The budget surplus for this biennium projected at the end of the 2023 Legislative Session grew by $808 million from $1.6 billion to $2.4 billion. The primary reasons for the upward revenue bump were increased purchasing, which raised sales tax revenues, and higher corporate tax collections due to higher corporate profits. While this has to be considered an increase in one-time money, it is still very good news and shows the Minnesota economy as still percolating.
The Not-So-Good side of the ledger comes when looking at the next biennium, where an $82 million deficit is shown after increased base spending passed in 2023 and $880 million in expected inflation is factored into the projection. A considerable portion of the $1.4 billion in base level spending increase is attributable to the inflationary increase that will automatically be added to the general education basic formula and the spending to reduce the special education cross-subsidy that was also added to the base. There were also a number of other smaller programs in the final E-12 bill for which spending was extended into the next biennium. It also has to be added that while inflation is factored into the forecast, the 2025 Legislature will have the option not to fully recognize inflation in the budget that will be passed. The difference in 2025 is that inflation on the general education formula will be recognized. That was one of the major accomplishments of the 2023 education funding bill and will provide districts with an enhanced ability to plan ahead.
Of course, things could change. The economy could slow down or it could continue growing at a reasonably solid rate, which would change next biennium’s outlook in one way or another. Also, we don’t know if levels of spending will remain at the same level. If the economy slows down, we can expect more human services spending. If the economy continues on its present pace or improves, we may see less spending on income support programs and other programs to soften poverty.
Most importantly, what does this mean for the upcoming 2024 Legislative Session. It probably means that there will be a run on one-time money for various narrow purposes that may not require base funding. Also, with interest rates remaining high, the Legislature may want to pay for some capital projects with cash as opposed to funding through a bonding bill. At any rate, it probably won’t be a big year in education spending. Education did very well last session with approximately $2.5 in total spending. While other committee chairs did not cry “Foul!” as the bills were being put together, those same chairs would probably like the spotlight to pivot there way this session (and probably in the next biennium).
Here is a link to the presentation from staff at Minnesota Management and Budget that accompanied the forecast: November 23 Budget Forecast Presentation
For a more in-depth look, here is the complete forecast: November 2023 Budget Forecast
DFL Retains Seat in Special Election. Rosemount-Apple Valley-Eagan school board member and DFL candidate Bianca Virnig won Tuesday’s special election to replace Representative Ruth Richardson, who resigned her seat in September. Virnig’s main opponent was Republican Cynthia Lonnquist, who has run for the seat in the past. The final margin of victory for Virnig was 1,148 votes (3,853-Virnig/2,705-Lonnquist). Libertarian candidate Charles Kuchlenz received 59 votes. It’s impossible to tell whether this is a harbinger of much of anything as it relates to the 2024 general election. The vote totals here were impressive for a December special election, but were far less than will likely be generated next November. It may be that there are simply seats that are no longer that competitive regardless of what is happening in the macro national political scene. At any rate, the partisan split in the State House of Representatives remains at 70-64 with the DFL holding the majority.