The O’Jays said it best back in the early-1970s with this big hit (although the song gets a little dark). The state is flush with “Money, Money, Money.” The budget forecast released today shows a projected surplus of $7.7 billion. The primary engine in the growth of the projected surplus is rapid growth in tax receipts. They are up more than $5 billion since the post-session forecast. We had been hearing all summer that tax collections across all categories (income, corporate, and sales) were rising, but I’m guessing the only people not surprised by the magnitude of the increase are those mapping the data in the Minnesota Department of Revenue and Minnesota Management and Budget. The state also spent $364 million less than anticipated, with much of the savings being realized through lower than expected pupil numbers attending Minnesota K-12 schools. Of the $7.7 billion, it is estimated that $3.1 billion is one-time money and $4.3 billion is on-going.
It’s too early to determine what the actual battlelines between the two legislative bodies and the Governor will look like, but the Senate will likely push for considerable and on-going tax cuts while the House and Governor will likely present a mixed package that will include both tax cuts and additional spending. It’s worth pointing out that the budget target for the final E-12 omnibus bill that passed last session was around $200 million less than what the Governor had proposed and the House had passed. With the formula taking center stage in the final bill, funding to help keep the special education cross-subsidy where it is and reducing the cross-subsidy for English Language Learners was not included and I wouldn’t be surprised if those two items resurface during the 2022 session.
There may also be a chance for increased equalization for school levies. The Governor proposed around $90 million of increased equalization for the local option, operating referendum, and debt service levies in his 2021 budget recommendations. In addition, the Senate proposed about $25 million for increased equalization of the operating referendum. As we’ve seen in recent news reports, property taxes have been rising, so there may be an appetite for education-related property tax relief to cushion rising residential and commercial property taxes. I have been working with legislative staff on a bill that would provide considerable property tax relief by increasing equalizing factors for a number of school-related levies (principally those addressed by the Governor last session and the Senate in terms of the operating levy). Sometimes ideas and ability to implement those ideas due to resource availability come together and while increased equalization would have budget tails extending into the next biennium, the optimism expressed in this budget forecast indicates resources would likely be there.
Below is Powerpoint delivered this morning by MMB.
We started off with the O’Jays and we’ll close out with Buddy Guy and the video of another money-related song, the classic oft-recorded “Money,”