Coronavirus impact on Minnesota finances quantified: $7 billion deficit over next 3 years

The coronavirus pandemic’s impact on Minnesota government coffers is not good.

That part we’ve known for some time.

On Friday, state finance officials, armed with income tax payments from earlier this month, clarified how not-good they think the picture is: Over the next three years, a roughly $7 billion budget shortfall looms for Gov. Tim Walz and lawmakers.

That $7 billion figure comprises two figures, each of which will be tackled differently:

• A $2.4 billion hole in the current two-year $48.3 billion budget. That projection was announced in May, and it appears to have held up. The state could cover it with its rainy day fund, but the state’s top finance official, Management and Budget Commissioner Myron Frans, has cautioned against draining that fund. The current Legislature and Walz will have to tackle this shortfall before the end of the state’s current two-year budget cycle, which ends June 30, 2021.
• A $4.7 billion hole in the 2022-2023 budget cycle. In a May report, Frans and other state officials declared “it is likely that the negative impact on the state budget in the next biennium will be significant,” but at the time they said it was impossible to quantify. Friday’s announcement quantified it. This projected shortfall will ultimately need to be addressed by Walz and the next Legislature, which will be elected in November and take office in January.

In a statement Friday, Walz, a Democrat, said this: “Minnesota is not alone. States across the country are facing large budget gaps during this global pandemic. We have challenges ahead, but we will continue to make smart fiscal decisions and request aid from the federal government to help our state manage this difficult time.”

House Minority Leader Kurt Daudt, R-Crown, issued a statement citing the new information as a call for fiscal prudence. “Minnesota is staring down a massive budget deficit, and it will only get worse if we bury our heads in the sand and pretend it doesn’t exist,” Daudt said, in part. “Gov. Walz wants hundreds of millions of dollars in new spending that will only make our task of closing the deficit more difficult next year. New spending should be totally off the table unless we can identify dollar-for-dollar budget reductions so we aren’t making the problem worse.”