The office of Minnesota Management and Budget (MMB) today released its annual February economic forecast. The report, which details the state’s budget picture, projects a surplus of $3.7 billion. However, Minnesota also faces a structural budget deficit of $1.5 billion, meaning Minnesota is spending more than it is taking in.
“The news of a surplus might make us feel good, but look beyond the headline and you’ll see clear warning signs,” Senator Carla Nelson (R-Rochester) said. “I am deeply troubled by the state’s $1.5 billion structural deficit. We’re spending significantly more money than we are taking in. It cannot continue. Last session, I was one of a number of legislators who cautioned about growing the size of government by 40%, spending the entire $19 billion surplus, and the $10 billion in tax increases that have kept our budget in the black for now. But we have to be cautious and get our spending under control. We have a duty to be responsible stewards of Minnesota taxpayers’ dollars. That didn’t happen last session. It is time to repair the damage and get Minnesota back on solid footing.”
On Tuesday, Senator Nelson and her Senate Republican colleagues unveiled their Repair Minnesota agenda aimed at fixing mistakes and reversing the consequences of flawed bills that Democrats approved during the 2023 legislative session.
The rollout came days after legislators had to quickly fix several mistakes, including an unintended $350 million tax increase, in the 2023 tax bill. Work is also progressing on repairs to a 2023 law that caused school resource officers to be pulled from schools. These and other issues resulted when Minnesota’s one-party controlled government rammed legislation through the 2023 “Do It All at Once Session” which lacked the checks and balances that come with bipartisanship.
Senator Nelson said she plans to initiate and support proposals to address other mistakes from the last session, including repairing the potential damage done to family budgets after Democrats spent the entire $19 billion surplus and raised taxes by $10 billion in order to support a 40% increase in state spending.
“The one-party control we experienced last year, and continue to experience now, should serve as a cautionary tale,” Senator Nelson said. “We saw unsustainable spending increases, onerous tax hikes, and crippling mandates that severely increased costs for Minnesotans. Our schools, small businesses, and working families are still reeling. I am approaching this session as a ‘fix-it’ session; we must repair the mistakes and damage from the previous legislative session.”
One critical repair was missing from the tax corrections bill that legislators approved last week: a change to net operating loss subtractions that will hit small businesses with a big tax increase. The change was set to take effect in tax year 2024, but an error in the bill writing caused it to begin effective tax year 2023. This means small businesses and entrepreneurs will be paying about $15 million more in taxes this year. Even though House and Senate Tax Chairs made a promise to fix this mistake it was omitted from the tax corrections bill.
The Repair Minnesota agenda aims to give school districts more flexibility on how they can use last year’s funding and roll back mandates tied to that money. Despite historic increases in funding last year, many new mandates have chewed through half the increase. Senator Nelson and her colleagues propose allowing any of the 2023 funding to be used for a local need, effectively cutting the red tape of bureaucracy, and giving schools the freedom they need to educate students, hire staff, and keep schools safe.