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Minnesota projects $2.4B surplus for fiscal year 2024-25 but trouble after

(The Center Square) – Minnesota’s financial officials project a $2.4 billion surplus for the fiscal year 2024-25, up $808 million from the end-of-session estimate.

Minnesota’s budget and economic outlook remain stable in the current biennium, but a “significant structural imbalance” constrained the budget outlook in fiscal year 2026-27.

The summary notes: “Higher estimates in health and human services and education raise total spending in FY 2024-2027, resulting in a negative structural balance in the next biennium.”

Minnesota expects to face a $2.3 billion deficit in fiscal year 2026-27.

Higher expected consumer spending and corporate profit growth raise the fiscal year 2024-25 tax revenue forecast.

The near-term U.S. economic outlook has improved since February, driven by stronger-than-expected consumer spending, business investment, and employment.

For example, a report says Minnesota’s new paid family and medical leave program will cost taxpayers about $628 million more than expected and the PFML tax will be 31% higher than expected in year two.

Senate Minority Leader Johnson, R- East Grand Forks, blamed the small surplus on the $72 billion budget passed by Democrats that depleted the previous roughly $17 billion surplus.

“They spent the entire surplus, raised taxes by $10 billion, and now we are seeing future deficits on the horizon,” Johnson said in a statement. “Minnesotans can’t afford one-party Democrat control.”

Johnson said that Democrats underfunded mandates, which will bring more tax hikes.

“The ‘insatiable appetite’ for tax increases will only grow this session,” Johnson said. “Despite historic funding for education, local schools are proposing local tax increases because Democrats underfunded their mandates. Small businesses are getting hammered with tax hikes, health care costs, and inflation. Consumers are spending more because costs are higher due to inflation.

House Speaker Melissa Hortman, DFL-Brooklyn Park, said Democrats will continue to focus on growing the economy.

“Today’s economic forecast shows that Democrats are growing the economy in Minnesota, and that the policies we’ve enacted are supporting Minnesota’s workers, reducing costs for families, and growing the labor force,” Hortman said in a statement. “At the same time, as our economy continues to do well and corporate profits continue to soar, we know there are Minnesotans who aren’t doing as well in their family budges. You’ll see Democrats continuing to focus on growing the middle class, lowering costs, and reducing stress in people’s lives. We will continue working to build a Minnesota that works better for everyone and reflects the values that we all share.”

The 2024 legislative session begins Feb. 12.

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