Policymakers have a historic opportunity this year to tackle the ongoing health and economic effects of the pandemic, and make transformational changes to build a more equitable recovery. The latest budget forecast showed a projected $9.3 billion general fund surplus for the current FY 2022-23 budget cycle, and $6.3 billion in FY 2024-25, an increase from the historic surplus projected late last year.
Governor Tim Walz recently released updates to his supplemental budget proposal, which adapts to the new forecast figures. The major change over the proposal he released in January is a substantial increase in proposed direct payments to Minnesotans. He also proposes some smaller new initiatives, some of which improve health and income supports for low-income Minnesotans.
| Governor Tim Walz’s Updated Supplemental Budget General Fund Proposals | FY 2022-23 | FY 2024-25 |
| Economic Development, Energy, Ag and Housing | $3.5 billion | $312 million |
| Property Tax Credits and Aids to Local Governments (includes one-time direct payments) | $2.1 billion | $242 million |
| E-12 Education | $790 million | $1.7 billion |
| Health and Human Services | $662 million | $2.3 billion |
| Transportation | $546 million | $420 million |
| State Government and Veterans | $557 million | $100 million |
| Capital Projects and Grants | $285 million | $12 million |
| Tax Revenues | -$238 million | -$194 million |
| Environment | $217 million | $12 million |
| Public Safety and Judiciary | $165 million | $322 million |
| Higher Education | $130 million | $245 million |
| Debt Service | $17 million | $139 million |
The proposal also would expend $1.1 billion of state ARP fiscal recovery funds in FY 2022-23.
Direct payments
By far, the largest update to the governor’s budget is an increase in his proposed one-time direct payments to Minnesotans. The updated proposal would more than double these payments: sending $500 to single taxfilers with incomes up to $164,400 and $1,000 to married joint filers with incomes up to $273,470. His original proposal was for $175 to single taxfilers and $350 for married joint filers.
This increase would require an additional $1.3 billion in FY 2022-23, or 87 percent of the new resources projected in the February forecast, for a total of $2 billion in direct payments.
The payments would automatically go to more than 2.7 million Minnesota households that filed a 2020 income tax return or a 2020 property tax refund (known commonly as the Circuit Breaker for homeowners and Renters’ Credit for renters.) The income limits exclude the small share of Minnesotans with incomes high enough to reach the state’s top income tax bracket. If policymakers enact this proposal this year, we encourage them to also include an application process for filers who meet the income and residency requirements to qualify but did not file a 2020 return.
Health and Human Services
A crucial new piece of Walz’s revised budget responds to the COVID-19 pandemic’s impact on Minnesota public health care programs. Policymakers at the state and federal levels responded to the pandemic with major changes to Medical Assistance (as Medicaid is called in Minnesota) and MinnesotaCare to ensure that Minnesotans did not lose their health care. A declared federal public health emergency is expected to keep these coverage protections in place until this August. The governor’s proposal would use a variety of mechanisms to keep Minnesotans connected to their health care, even if the federal public health emergency is not further extended. These include making changes to how renewals are processed and temporarily ending premiums for certain individuals living with disabilities. The proposal would cost $9.5 million in FY 2022-23 and $3.7 million in FY 2024-25 from a combination of general fund and health care access fund resources.
Another new proposal would provide reimbursements and grant funding to offset costs that behavioral health workers incur for expenses related to education, training, and licensure and other related costs. The governor’s revised budget proposes $31 million in FY 2022-23 and $23 million in FY 2024-25.
What’s next
The state’s positive budget situation does not mean that we’re all doing well. Like the pandemic, the recovery is not impacting all Minnesotans equally, and many are still struggling. This winter, 148,000 Minnesota adults said they couldn’t afford to give their kids enough to eat, 130,000 Minnesotans were behind on rent, and 920,000 adults were having trouble covering basic household expenses. And because of long-standing structural inequities, our Black and brown neighbors are disproportionately likely to be struggling to get by.
As the policymakers work toward policy and budget agreements this session, it is imperative they use this opportunity to fully respond to the ongoing health and economic impacts of the pandemic, as well as the deep disparities in opportunity and areas of disinvestment that were worsened by COVID. Policymakers should prioritize investments that make transformative changes that will build a more equitable economy and future.