Walz Releases Revised Two-Year Budget Proposal

(KNSI) – Gov. Tim Walz released his revised two-year budget for the state on Thursday after new projections show that the state will be working with a budget surplus, not a shortfall.

In February, Minnesota Management and Budget published its latest forecast, saying that the state faces a $1.6 billion surplus for the upcoming budget period, which starts July 1st. An earlier forecast projected that Minnesota would see a $1.3 billion shortfall.

With the anticipated surplus, Walz’s new plan would not use funds from the state’s budget reserve to balance its budget like Walz’s first proposal suggested.

“Minnesotans have met the challenges of COVID-19 pandemic as they always do when faced with hardship—with grit and resiliency,” Walz said. “But we know that our students, working families, and small businesses have borne the brunt of this pandemic. That is why, with the recent good news that Minnesota now projects a positive budget balance, we’re recommending additional investments to support working families, ensure students catch up on learning, and help small businesses stay afloat while driving economic recovery. Our revised budget also maintains a full state savings account by restoring $491 million to the budget reserve, so we can be prepared for whatever lies ahead.”

New suggestions in the revised budget amp up the sum of tax cuts for working families and small businesses from $230 million to $1 billion. The plan includes full tax exemption on Minnesota businesses’ forgivable loans (such as Paycheck Protection Program funds) up to $350,000.

Walz’s proposal calls for $1.6 billion in new investments. Suggestions highlighted by the Walz administration include ensuring earned sick and leave time for Minnesota workers, expanding access to tutoring services for K-12 students and allowing a subtraction of up to $10,200 for taxable unemployment benefits for those who received unemployment payments in 2020.

Increased tax revenue in the new proposal shrinks to $670 million from the $1.66 billion originally proposed.

“We know that not every Minnesotan was equally affected by this pandemic. We’ve been intentional to center those Minnesotans who have been most impacted by the devastating losses of the pandemic,” Lt. Gov. Peggy Flanagan said. “The additional tax relief in Minnesota’s Revised COVID-19 Recovery Budget helps children and families get by and delivers much-needed support those who deserve our help. We will not cut our way to prosperity. These investments ensure we don’t just get back to normal but get back to better for all Minnesotans.”

The governor’s revised proposal comes one day after Senate GOP leaders released their budget counterproposal. After Walz released the details of his budget plan in late January, Republicans critiqued the suggestion that the state raise taxes on Minnesota’s top wage earners.

Neither plan factors in the $2.6 billion the state is expected to receive through the American Rescue Plan, but Walz’s office says the state is currently working to budget the flexible federal funds. Plans for that funding will be announced in the future.

One of the only suggestions dropped from the budget proposal’s first version is a cigarette tax increase.