Minnesota's new budget forecast redefines legislative session

by Trevor Russell

What will Minnesota Management & Budget's projected surplus and the potential federal stimulus mean for environmental issues this legislative session? (Image from MMB)

The audible “woot” you may have heard late last month from St. Paul was the sound of a state budget deficit turning into a $1.6 billion projected surplus. The implications for the legislative session are significant.

The sudden (if not entirely unexpected) turnaround redefines the contours of the 2021 legislative session, including how environmental issues will fare. Here's the backstory and what it means for our environmental priorities this session.

The bad news: Last November's forecast

Easily missed among the seemingly inexhaustible stream of awful news that was the entire 2020 calendar year: a particularly disappointing November budget forecast for the state.

Minnesota Management & Budget (MMB) forecast a deficit of $1.273 billion for the FY22-23 biennium, which begins July 1, 2021. As the Legislature is legally required to pass a two-year budget during the 2021 legislative session, that set the tone for what was likely to be a challenging budget debate in the capital city.

In particular, we noted in our November article that the forecast suggested two of the three primary sources of state environmental spending were going to take a pretty big hit: state general fund spending and Legacy Amendment funds. (1)

The good news: The February forecast

We needed some good news, and boy did we get it! On February 25, the MMB revised Minnesota's budget forecast.

The forecast (available here for those willing to tackle the 88-page document) concludes that “There is no longer an anticipated shortfall for FY 2022-23, and we now project a positive balance of $1.6 billion because of a higher revenue forecast, lower state spending, and an increased surplus for the current fiscal year.”

The great news: Federal stimulus

But wait ... there is more! Congress has now passed and President Biden has signed into law a $1.9 trillion federal COVID stimulus package that includes significant financial assistance for states, local governments, businesses and individuals. Estimates suggest the package will include somewhere in the neighborhood of $4.7 billion for Minnesota, including $2.6 billion to state coffers

These additional funds will very likely stabilize our economy, altering the state’s budget outlook significantly for the better.

What the surplus and stimulus mean for our priorities

As far as FMR’s top legislative priorities this session, this is excellent news.

While Minnesota’s general fund spending on the environment is just 0.7% of the state’s budget, securing full funding for Forever Green and preventing deep funding cuts to core environmental programs are easier tasks when budget pressures aren’t working against us.

Preventing raids to dedicated environmental funds (like the Clean Water Fund and Environment & Natural Resources Trust Fund) is easier when budget shortfalls elsewhere don’t send lawmakers searching for raid targets.

Other important issues, including lead service line replacement, base funding for Soil & Water Conservation Districts and new investments in soil health programs can now be more fully embraced. Meanwhile, strong economic growth and low interest rates continue to make long-overdue investments in our state’s water infrastructure more attractive.

Still, 2020 taught us that anything can (and probably will) happen, and there is a lot of work to be done yet this session to invest in our environment.

But for today, we can all at least take a deep breath and be thankful for some well-deserved good news.

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(1): The state's third major environmental funding source (The MN Environment & Natural Resources Trust Fund) uses investment revenues from an existing trust fund, supported by ongoing lottery proceeds. Neither the trust fund itself nor lottery proceeds supporting it were forecast to be significantly harmed by the downturn, though that hasn't stopped political scuffles from upending that funding source.