State Budget Picture Further Complicates 2018 Session

On Dec. 5, Minnesota Management and Budget (MMB), the state’s fiscal agency, revealed its November economic forecast, which predicts a $188 million budget deficit in the 2018-2019 biennial budget and a deficit of $586 million in 2020-2021.

Because of the deficit, legislators may be forced to pass a budget supplemental bill in which they will have to cut expenditures, raise revenue, repurpose existing funds, tap budget reserves, or some combination of all four approaches. In past legislative sessions where deficits existed, legislators have turned to Health and Human Services budget cuts or raided the Health Care Access Fund as a means to backfill the state’s coffers.  

This budget deficit news further complicates the 2018 legislative session that begins Feb. 20. When legislators return to the Capitol they will already be facing a protracted budget battle with the governor, sexual harassment charges against a number of legislators, and the looming November election.

A number of factors lead to the anticipated shortfall - uncertainty in the global economy, revenue collection that has fallen short of budget, and increased spending.     

The forecast assumes that the federal government will not reauthorize CHIP, a federal program to provide insurance coverage to low-income children. Should Congress reauthorize CHIP, the deficit in the current biennium would drop to $10 million in the current biennium.   

Additionally, the forecast does not include funding for the Legislature, as it was line item vetoed by Gov. Dayton at the conclusion of the 2017 session. Passing funding to authorize operations of the Legislature will be the first task awaiting legislators in February 2018, and appropriating those dollars will cause the deficit to grow.