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Budget & Economic Forecast

Twice each year we prepare the Budget and Economic Forecast as required by Minnesota law. The November forecast is used to set the starting point for the budget, and is the basis for the Governor’s recommendations. The February forecast incorporates additional data and is used by the Legislature and the Governor to set the enacted budget or to ensure that enacted budgets remain on track and in balance. Forecast information is also used by bond rating agencies and other financial analysts to review the state's financial health, and by the media who present information on the state's financial condition to the public.

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Banner_B&EF Latest: November 2015 Budget & Economic Forecast 

December 3, 2015

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>>  Read Complete Document (pdf)

>>  News Conference Handout (pdf)

Budget Outlook Improves; FY 2016-17 Available Balance now $1.206 Billion. FY 2016-17 revenues are now forecast to be $42.718 billion, a $90 million (0.2 percent) increase over end of session estimates.  Current law spending is forecast to be $41.585 billion, $249 million (0.6 percent) below previous projections.   In addition, changes in revenues and expenditures in FY 2015, among others, provide $682 million of additional resources to the FY 2016-17 biennium.  This brings the forecast balance to $1.871 billion, up from $865 million at the end-of-session.  Current law allocates $71 million to Environmental Funds and $594 million to the budget reserve, leaving an available balance of $1.206 billion.

Law Directs $594 million to Budget Reserve. Under current law, 33 percent of any November forecast balance in the current biennium is to be allocated to the budget reserve until the recommended level of $2.032 billion for FY 2016-17 is reached. This forecast directs $594 million to the budget reserve, increasing it to $1.597 billion—or 3.8 percent of FY 2016-17 non-dedicated revenues. 

U.S. Economic Outlook has Weakened. Exports weakened by the stronger dollar, along with slower capital investment in the wake of falling oil prices, have helped restrain overall economic activity this year. IHS Economics has lowered their forecast for U.S. real GDP growth in 2015 from 3.0 percent in February to 2.4 percent in November’s outlook. The November baseline for 2016 now calls for real GDP growth of 2.9 percent, compared to 2.7 percent in February. The growth forecast for 2017 is unchanged. 

Higher Expected Sales and Corporate Taxes Offset Lower Income Tax Forecast in FY 2016-17. Lower expected income growth reduces forecast individual income tax receipts for the 2016-17 biennium. Higher than expected FY 2015 sales tax receipts raise the general sales tax forecast over the prior estimate. A reduced corporate refund forecast together with higher expected gross tax payments increase expected net corporate tax revenues. 

Lower Expenditure Growth Expected in FY 2016-17. Human services estimated spending is lowered by $416 million in FY 2016-17. The savings are primarily driven by lower health care rates and payments in the Medical Assistance program. Estimated spending for E-12 and other areas increase. Overall, total spending is lowered by $249 million in FY 2016-17.

Long Term Budget Outlook Remains Strong. The improved budget outlook continues into the planning horizon as revenue growth exceeds spending growth.  Without adjusting for inflation, there is a structural balance of $2.046 billion for FY 2018-19.  Economic changes, as well as the nature and timing of any budget changes for the 2016-17 biennium, may materially affect both revenue and expenditure projections for the next biennium.

Supplemental Material

>>  Minnesota Economic Forecast

>>  Supporting Budget Documents

>>  Additional Budget Data

Related Publications

>>  Latest Revenue & Economic Update

>>  February 2015 Budget & Economic Forecast (pdf)

>>  Forecast & Updates Library



Watch: Press Conference on November 2015 Budget & Economic Forecast

December 3, 2015

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