A year after Minnesota leaders were bracing for a massive budget hole as COVID-19 swept the nation, state finances are looking brighter — way brighter.
Minnesota tax collections in May generated nearly $1.8 billion more than experts had predicted for that month, 119% above expectations, according to a new state revenue report released Thursday. The larger-than-anticipated numbers were due in part to delayed tax filings, since people could wait until May 17 to complete their taxes.
That delay resulted in April's numbers dipping slightly below expectations. But overall state revenue for fiscal year 2021 has been high, bringing in nearly $2.2 billion, or 10.4% more than economists had predicted during the last state budget forecast four months ago.
People are spending more than anticipated, federal funds continue to flow into the state and the economy is reopening as vaccination rates climb. Sales and corporate tax revenue were up last month, although the bulk of the surplus revenue came from individual income taxes.
DFL Gov. Tim Walz called the numbers "gratifying" during a news conference Thursday.
"The economy's fundamentals are strong, and continuing to be that way gives us the opportunity, looking to the future, to make those investments that make a difference in Minnesota," Walz said, calling for more spending on children, infrastructure and "the research and innovation that have led to so much of this job creation."
Walz and legislators are in the midst of negotiating the next two years of state spending, and the governor was not the only elected official emphasizing his budget priorities in light of the surplus tax dollars.
"Given that the government of the state of Minnesota is swimming in cash, there is ZERO excuse to oppose lowering the cost of government for small businesses and families who have struggled through the pandemic," Rep. Pat Garofalo, R-Farmington, tweeted Thursday.
Minnesota Management and Budget Commissioner Jim Schowalter cautioned last week that the monthly revenue reports can feature big swings up and down, and the state should not budget off those numbers.
However, he said many states across the country are similarly reporting strong tax collections, adding, "They are all reporting more revenue than they expected even just a couple months ago."
Jessie Van Berkel • 651-925-5044