Governor Walz Releases Supplemental Budget Recommendations, Legislature to Set Budget Targets

March 23, 2021

Governor Walz’s supplemental budget recommendations were released last week. The Governor released his initial budget recommendations to the Legislature in January based on the November budget forecast that indicated a substantial budget deficit. His updated recommendations are based on the  improved budget forecast from February that now projects a surplus of over $1.5 billion in the upcoming biennium. His initial budget recommendations made slight one-time cuts to both the Minnesota Investment Fund as well as the Job Creation Fund. He also called for tax increases on businesses and high earning individuals as well as an increase on tobacco products. His new budget recommendations do not rescind the one-time cuts to MIF and JCF nor do they back away from proposed tax increases on businesses and high income individuals, but does no longer call for an increase on tobacco products. These budget recommendations do not take into account the federal relief money that will be coming to Minnesota as a result of the American Rescue Plan.

The next big step for the Legislature is for the House and Senate to release their budget targets and then assemble their omnibus bills. The Senate Republicans released their targets late last week which add up to a total two-year budget of just under $52 billion. Their proposal includes $591 million in tax relief on PPP loans and tax elimination for unemployment benefits, in addition to no proposed tax increases. They also outline a 5% cut to government administrative costs, $100 million for unemployment due to the pandemic in the Jobs Committee target, and $40 million in broadband funding. These targets also do not account for the incoming federal relief funds.

House Democrats are expected to release their budget targets early this week which should align more closely with the Governor’s supplemental recommendations. Once each Chamber has their targets set the chairs of the Finance committees will begin assembling their omnibus bills to be acted on after the Easter/Passover Legislative Recess (legislative break is March 26th thru April 5th). Once the omnibus budget bills make it through the Committee process and are passed off each Chamber’s floor, a Conference Committee will be named to begin ironing out the differences between the House and Senate bills to hash out a final product and set the next two-year state budget.