The Minnesota Legislature convened in February 2020, expecting its work to be completed by mid-May. However, that was far from the end of it as Gov. Tim Walz called the state’s 67 Senate and 134 House members back to work in special sessions a record seven times, including Dec. 14, when an additional $216.5 million was appropriated to provide assistance to struggling Minnesota businesses and to extend unemployment benefits for workers affected by the COVID-19 pandemic.
Meanwhile, the state’s $47.6 billion budget for the two-year period ending June 30, 2021, has been under scrutiny with wide-ranging views expressed as the COVID-19 era expanded its destructive reach into the economy. Those in the know thought pandemic-induced furloughs, pay reductions and layoffs would lead to a 6% drop in total salary and wage income this year, causing commensurate reductions in income and sales tax collections. Not so.
At one point a $2.4 billion state budget deficit was projected and just two months later that number was increased to $4.7 billion. Then came a surprising turnaround as the state’s Department of Management & Budget recently estimated the current budget would end with a surplus of $641 million. However, a projected $1.27 billion shortfall is anticipated in the two-year budget beginning next July.
Economists explained the stunning change as a result of higher than expected business investments, sales and income tax receipts. Total income will, they say, decline by just 1.4% this year, helping keep the state’s income tax revenue high. One aspect of the income tax situation is that most of those who have been laid off are lower wage earners who pay lower income taxes. As a result the state’s tax collections have been higher than anticipated. Higher income workers’ pay was largely unaffected as their jobs generally continued in one manner or another.
What is now needed is clear thinking as the lawmakers elected in November come to work Tuesday, Jan. 5, 2021. DFL governor Walz will be sharing responsibility with a Minnesota House (70 DFLers and 64 Republicans) and a Minnesota Senate (34 Republicans, 31 DFLers). Additionally, two former Democrats have declared themselves to be Independents and have been named committee chairs working with the oh-so-slim Senate Republican majority.
Legislators will be hard-pressed to meet a myriad of spending demands, balancing the biennial budget and adjusting for uncertain revenue streams as we begin to emerge from the pandemic’s economic aftermath.
Budget reserves must be managed wisely. We urge policymakers maintain the reserves judiciously to assure they can support budget priorities and are available to invest in making future challenging times less burdensome. Also the state’s budget forecast document warns the outlook remains “volatile and uncertain and depends critically on the path of the pandemic.”
A goal for the state must be to continue to grow and gain prosperity, especially for those most in need at the lower end of the income cycle. Education, transportation, health and human services and many other departments will outline pressing financial needs. We must be compassionate to communities hit disproportionately, including people of color and those employed in service industries devastated by the virus. Additional relief packages may be needed as many continue to struggle with housing and employment insecurities.
We also need to be cautious with taxation. Employers and individuals who may be considering a move to our state do look at our quality-of-life considerations — schools, environment, entertainment and the arts among them — but also at their taxes.
This complex puzzle of necessary expenses, revenue concerns and maintaining a rainy day fund will require compromise, collaboration and cooperation from a legislature split by party and geography. We urge our state’s leaders to attack these issues with wisdom and open-mindedness, to find solutions to our needs and balance a budget that will be fair and equitable to all.
— An editorial from the APG of East Central Minnesota Editorial Board. Reactions are welcome. Send to: email@example.com.