State Budget Forecast Shows Improved Financial Picture

Posted on December 2, 2020 by Jeff Bostic

Earlier this year, the state produced two special budget updates to look at the impact of the COVID-19 pandemic on the state’s economy. Those updates showed disturbing projected budget shortfalls of $2.4 billion for the current biennium and $4.7 billion for the biennium starting July 1, 2021. Since that time, state revenue collections have exceeded expectations and the budget looks more positive.

In the forecast released yesterday, the current biennium picture has now shifted dramatically and shows a projected surplus of $640 million, and the picture for the upcoming biennium has improved to a deficit of $1.27 billion. The majority of these changes are due to improved revenue projections, although there are some projected spending decreases particularly in the current biennium. The biggest factor on the expense side is the expected continuation of the higher federal Medicaid percentage payment through the end of the current biennium, which combined with some reductions in health spending produces almost $100 million improvement for the state’s bottom line.

The surplus for the remainder of the biennium raises the possibility of additional state spending to assist those businesses, including long-term care providers, most impacted by the pandemic. LeadingAge Minnesota and our Long-term Care Imperative partners are working on a proposal to address staffing issues in our settings. We are hopeful that it can be considered as soon as a special session anticipated next week.