February 11, 2019
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February 11, 2019
Budget Outlook Improved
• Projected balance now $1.332 billion for FY 2020-21
• Budget reserve reaches $2.359 billion target
• Economic outlook improved, but slowdown remains in forecast
• With increased revenue forecast, FY 2022-23 shows structural balance, however budget challenges remain
2
Current Biennium’s Balance Increases
($ in millions)FY 2020-21
End-of-SessionFY 2020-21
Nov. ForecastForecastChange
Beginning Balance $3,080 $3,971 $891 Revenues 48,155 48,656 501 Spending 48,470 48,463 (7) Budget Reserve 2,075 2,359 284Cash Flow Account 350 350 -Stadium Reserve 98 124 25
Budgetary Balance $242 $1,332 $1,090
Minnesota Management and Budget | mn.gov/mmb 3
Allocation of Forecast Surplus to Budget Reserve
($ in millions)
$ Level% FY 2020-21
Revenue Budget Reserve Target $2,359 4.9%Budget Reserve Balance Prior to this Forecast 2,075 4.3
Amount Below Target 284
General Fund Balance Prior to Reserve Allocation $1,616
Allocate 33% of General Fund Balance to Reserve 533or
Allocate up to Reserve Target Level $284
Reserve Balance After Allocation $2,3594
U.S. Outlook Slightly Improved Since February; Slowdown Remains in Forecast
5
2.42.0
1.7 1.6 1.4
2.3 2.1 2.01.6 1.5
-0.1
-2.5
2.6
1.6
2.21.8
2.52.9
1.6
2.42.9
-3
-2
-1
0
1
2
3
4 February 2019November 2019
Real Gross Domestic ProductAnnual Percent Change
Source: U.S. Bureau of Economic Analysis (BEA), IHS Economics (IHS)
20Yr Avg Real GDP growth prior to '08 -'09 Recession (3.1%)
U.S. Consumer Spending Outlook Improved
2.62.4
2.01.7
1.4
2.6 2.82.4
2.1 2.2
2.63.0
0
1
2
3
4
2017 2018 2019F 2020F 2021F 2022F 2023F
February 2019November 2019
Real Consumer ExpendituresAnnual Percent Change
Source: U.S. Bureau of Economic Analysis (BEA), IHS Economics (IHS)
Presenter
Presentation Notes
In each year from 2020 through 2023, real consumer spending contributes more to real GDP growth than in the February outlook, boosted by a stronger trajectory for household wealth, including equities, and an upward revision to wage growth in 2018 and the first half of 2019.
3.6%3.2%
0%
2%
4%
6%
8%
10%
12%
1990 1995 2000 2005 2010 2015
U.S.Minnesota
Unemployment RateMonthly, Seasonally Adjusted
Source: Minnesota Department of Employment and Economic Development (DEED)
10+ Years
State Unemployment Rate has Risen; Remains Below U.S. Rate
= U.S. Recession
Presenter
Presentation Notes
MN UR has risen from a cycle low of 2.8 at the end of last year to 3.2 now (0.4 pts). The gap between U.S. and MN has also closed, and is now 0.4 pts, compared to a cycle high of about 3.0 pts. Still well below full employment, about 18th among states as other states have caught up with us. MN/US gap has shrunk prior to previous recessions, but it has stayed small for several years prior to 2008, and was close to 0.5 in 2016. As MN UR has risen, so has our LFPR, which is now 70.3, up about 0.6 pts from a year ago, and 7.0 pts above the U.S. rate.
High Demand for Workers in Minnesota
+1.5%
+1.5%
8Source: MN Department of Employment and Economic Development (DEED)
0
50
100
150
200
250
'06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19
Unemployment
Job Vacancies in thousands
Minnesota Labor Market IndicatorsThousands
Revenue Forecast Higher
($ in millions)
FY 2020-21 Nov. Forecast
ForecastChange
Individual Income Tax $26,039 $493General Sales Tax 12,125 252Corporate Franchise Tax 2,897 (294)All Other Revenue 7,596 51
Total Revenue $48,656 $5019
Forecast Risks
Consumer confidence
Trade policy uncertainty
Business investment slowdown
Geo-political events
19 months remain until the end of FY 2020-2110
Offsetting Factors Leave Total Spending Nearly Unchanged
($ in millions)
FY 2020-21 Nov. Forecast
ForecastChange
E-12 Education $20,098 $(24)Property Tax Aids & Credits 3,865 61Health & Human Services 14,677 (97)Debt Service 1,132 (51)Other 8,691 104
Total Spending $48,463 $(7)
11
Planning Estimates and Reserve Change
12
($ in millions) FY 2020-21Reserve Change FY 2022-23
Beginning Balance $3,971 $4,164Forecast Revenues 48,656 51,477Projected Spending 48,463 51,257
Budget Reserve 2,359 -491 1,867Cash Flow Account 350 350Stadium Reserve 124 +124 248
Available Balance $1,332 $1,919
Balance w/o Carryforward $587
Estimated Inflation $1,211
Budget Reserve Reaches Target
13Minnesota Management and Budget | mn.gov/mmb
$0 $9$658 $656 $661
$994
$1,597 $1,603 $1,698$2,075
$2,359 $2,359
$1,867 $1,867
0
500
1,000
1,500
2,000
2,500
Budget Reserve: FY 2010-23($ in millions)
FY 2020-21 Target: $2.359 billion$491Mj
February 11, 2019
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