On Tuesday, the office of Minnesota Management and Budget (MMB) released their annual November economic forecast. The report, which details the state’s budget picture, projected a deficit of $188 million for the current biennium.
According to a presentation by MMB Commissioner Myron Frans, the forecast is driven by lower-than-expected revenues based on assumptions about federal legislation and U.S. GDP and wage growth. The forecast assumes the U.S. Congress will not pass a tax relief bill, and it assumes 2.2% GDP growth in 2017 – this is despite growth of more than 3% the previous two quarters.
In addition, the forecast reflected $178 million in spending on the federal Children’s Health Insurance Program (CHIP), a gap that would be closed once the funding is appropriated at the federal level.
“We worked really hard this year to pass a responsible budget that benefits the people of Minnesota, and if you look closely at the November forecast, you’ll see the results of that,” said Sen. Mike Goggin (R-Red Wing). “Wages are projected to keep going up; our unemployment rate is very low; and Minnesota’s exports increased every quarter this year. The reason the forecast shows a small deficit is that it didn’t factor in two virtual certainties at the federal level – the passage of a tax reform bill, and the passage of funding for the Children’s Health Insurance Program. Rather than rush to judgment on this forecast, we should wait for the February forecast for a more accurate picture of our economic landscape.”