Fiscal year ends with a $2.7 billion surplus

Last May, Minnesota Management and Budget (MMB) released its Interim budget forecast, which predicted a $2.426 billion deficit for the 2021 fiscal year. This deficit turned into a $636 million surplus in the November budget forecast. And while MMB also predicted a $1.3 billion deficit for the 2022-23 biennium, the forecast has since been revised to a $1.6 billion surplus as of the February forecast.

Minnesota’s fiscal position continues to improve.

According to MMB’s most recent update, the state closed the 2021 financial books with a $2.7 billion surplus. Compared to the initial 2020 May Interim budget, Minnesota collected at least $5 billion more than anticipated in 2021.

Tax revenues are 11.2 percent higher compared to the February forecast. Additionally, total tax collections in April, May, and June — the final quarter of 2021 — are 28.7 percent higher than previously forecasted.

A nationwide trend

Minnesota is one of several states to report significant revenue surpluses. Other states, such as Indiana, Ohio, Wisconsin, and California, among others, have also seen similar results.

Overall, states haven’t suffered as big a blow as was expected at the start of the pandemic. In fact, as of February this year, more than half of all states reported collecting comparable, if not higher, revenues in the previous 12 months than they had in the 12 months before the coronavirus pandemic.

Currently, about 9 states have already cut their taxes. In some states, like Wisconsin and Ohio, this is in direct response to budget surpluses. Given its high taxes, Minnesota should follow suit and use its surplus for tax relief.