The Minnesota state government now faces a $2.4 Billion budget deficit for the biennium budget that ends on June 30th, 2021 according to a report released today by Minnesota Management and Budget. Projected revenues have fallen by over $3 Billion due to the downturn in the economy from the Governor's shutdown, while the Legislature has passed $500 Million in new spending this session.
Today's budget deficit announcement stands in stark contrast to the February Budget Forecast that projected a large budget surplus. Most experts and Capitol insiders predicted the surplus would be eliminated, but the level of deficit projected by the state economist has left many worried about how bad things will get in state finances.
State governments must balance a budget, which means either the Governor and the legislature will need to raise taxes to collect more revenue or start making cuts to government spending. Either option would be politically problematic for the remaining 12 days of the legislative session.
The state does still have a massive budget reserve fund over $2 Billion (often referred to as the "Rainy Day Fund"). Action 4 Liberty has long alleged this fund will be used in a crisis for government to continue operating in its bloated state instead of giving back to taxpayers who were overtaxed. Governor Walz alluded to spending rainy day funds to cover the deficit in his 2pm press conference.
On top of that, the federal government is likely to go further into debt and engage in another round of money printing to bail out state governments facing budget deficits. A similar move was made a decade ago during the Great Recession.