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Research & Analysis

Economic Analysis produces objective research and analysis on a broad range of topics related to Minnesota's economy and budget. We provide accurate and timely assistance to decision-makers, the media, and citizens in locating and understanding the latest economic, demographic, and fiscal trends. Click through the tabs below to learn more about our work.

Also visit:   Forecasts & Updates Library

Video Gallery

Budget Reserve Report

Like most state governments, Minnesota sets aside reserve funds to help manage budgetary uncertainty. Officially known as the budget reserve and cash flow accounts, these reserves afford policymakers greater financial flexibility during economic downturns and promote long-term fiscal stability. In addition, an established reserve fund policy is viewed positively by credit rating agencies.

In 2008, as part of analyses prepared for the State Budget Trends Study Commission, economists at Minnesota Management & Budget (MMB) developed a data-driven method for estimating the amount of reserves Minnesota would need to set aside to adequately manage state revenue volatility. MMB's annual Budget Reserve report summarizes key findings from the most recent review.

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Latest: January 2015 Budget Reserve Report

January 15, 2015

>>  Read Complete Document (pdf)

>>  Read Letter to Senators and Representatives (pdf)      

Recent actions taken during the 2014 legislative session increase Minnesota’s reserve fund levels and strengthen the state’s reserve fund policy. The state’s new formal budget reserve policy establishes a target that is comparable to what rating agencies believe to be consistent with responsible financial management practices. Nonetheless, the current funded balance in Minnesota’s budget reserve and cash flow accounts remains well below MMB’s recommended level given the underlying volatility of Minnesota’s tax structure. 

To adequately manage the underlying risks in Minnesota’s general fund tax system, MMB recommends a budget reserve policy of 5.1 percent of the current biennium’s general fund non-dedicated revenues, or a $1.990 billion reserve for the 2014-15 biennium. In the coming 2016-17 biennium, MMB recommends a budget reserve policy of 5.2 percent of non-dedicated revenues, reflecting the effects of projected changes to Minnesota’s revenue mix. Based on the current law revenue forecast for FY 2016-17, this amounts to a $2.166 billion reserve target.

By comparison, the balance in Minnesota’s budget reserve account following the November 2014 Budget & Economic Forecast is $994 million, or 2.5 percent of FY 2014-15 revenues. If the cash flow account is included, reserves equate to about 3.4 percent of current biennial non-dedicated revenue. 

As required by statute, MMB will continue to evaluate the adequacy of the statutory budget reserve based on any significant changes in the tax system.

Related Publications

>>   MMB's Reserve Recommendation Methodology (pdf)

>>   January 2014 Budget Reserve Report (pdf)

>>   January 2013 Budget Reserve Report (pdf)

>>   2009 Budget Trends Study Commission Report (pdf)

>>   Forecasts & Updates Library

Publications & Presentations


How Much is Enough? Minnesota's Rainy Day Funds & Tax System Volatility

NTA Presentation

Most state governments (including Minnesota) use rainy day reserves to cushion against the ups and downs of economic and tax revenue conditions. This presentation summarizes MMB's statistical method for estimating the appropriate size rainy day fund by quantifying the volatility of Minnesota’s tax base. It was made by MMB Economist Matt Schoeppner to the NTA Annual Conference on Taxation in Santa Fe, New Mexico on November 15, 2014.

Presentation Slides (pdf)


Rate of Return Assumptions for Minnesota’s Public Pension Plans

8-29-2013 Presentation

The expected rate of return assumption is typically used to compare the present-day value of pension assets to future pension obligations. This presentation (1) presents data related to U.S. economic growth and (2) summarizes consensus among economists who have written about public pension rate of return assumptions. It was made by State Economist Laura Kalambokidis to the the Minnesota Legislative Commission on Pensions and Retirement on August 29, 2013.

Presentation Slides (pdf)    Prepared Remarks (pdf)


Minnesota State Budget Trends Study Commission Report

BudgetTrendsStudy

The Minnesota State Budget Trends Study Commission was created by the governor and legislature to examine the changing demographics and the long-term stability of the state budget. The Commission reviewed financial recommendations from various studies completed over a 30-year period and heard presentations from numerous state officials with backgrounds in demography, education, health care, finance, and economics. The final report identifies the primary findings on demographic and fiscal trends, and presents the recommendations of the Commission. The Commission's report was released in January 2009.

Report (pdf)


Economic Indicators

Economic indicators provide key insight into the performance of Minnesota's economy. Prior to the production of each Budget & Economic Forecast we examine a variety of state and national economic indicators. The following links provide access to the latest data available for many of the important factors we consider.

Employment  
Data Tool Description Source Link
Current Employment
Statistics (CES)
Program develops monthly survey estimates of total non-farm employment by industry, as well as average weekly hours and average hourly/weekly wages earned in various industries for national, state and local areas by place of work. Minnesota
Data
National
Data
Source: MN Dept. of Employment & Economic Development (DEED)
Quarterly Census of
Employment & Wages
(QCEW)
Program compiles employment and wage statistics from a quarterly census of employers covered under the Unemployment Insurance (UI) Program, which includes about 97 percent of Minnesota employment. Data are available by industry, ownership type, and national, state and local area. Minnesota
Data
National
Data
Source: MN Dept. of Employment & Economic Development (DEED)
Job Vacancy Survey (JVS) Program develops semi-annual survey data on hiring demand and job vacancy characteristics. Data are available by industry and occupation as well as by state and sub-state regions.  Minnesota
Data

Source: MN Dept. of Employment & Economic Development (DEED)
Job Openings and Labor Turnover Survey (JOLTS) Program develops monthly survey estimates of job openings and labor turnover, including job openings, hires, quits, layoffs and discharges, and other separations, for national and census regions. Regional & National
Data

Source: U.S. Bureau of Labor Statistics (BLS)
Occupational
Employment Statistics
(OES) Survey
Program develops semi-annual survey estimates of employment and wages for about 800 occupation classifications. Comparable statistics are available by national, state, Metropolitan Statistical Areas, and sub-state regions. Minnesota
Data
National
Data
Source: MN Dept. of Employment & Economic Development (DEED)
Unemployment & Labor Force  
Data Tool Description Source Link
Local Area
Unemployment
Statistics (LAUS)
Program develops monthly survey estimates of labor force, employment, unemployment, and unemployment rates for national, state and local areas by place of residence.  Minnesota
Data
National
Data
Source: MN Dept. of Employment & Economic Development (DEED)
Unemployment Insurance (UI) Statistics Program provides demographic statistics on people filing initial and continuing claims for unemployment insurance benefits, including information on the occupation, industry, education level, race, sex and region of claimants. Minnesota
Data
National
Data
Source: MN Dept. of Employment & Economic Development (DEED)
Income & Output  
Data Tool Description Source Link
State & Local Area Personal Income Program compiles data on the personal income received by all persons, or on behalf of all persons, who live in Minnesota (by place of residence) and is measured before the deduction of personal income taxes and other personal taxes. Minnesota
Data
National
Data
Source: U.S. Bureau of Economic Analysis (BEA)
Gross Domestic Product (GDP) by State Program compiles data on GDP by state, which is the state counterpart of the Nation's gross domestic product (GDP), the most featured and comprehensive measure of economic activity. GDP by state is derived as the sum of the GDP originating in all the industries in a state. Minnesota
Data
National
Data
Source: U.S. Bureau of Economic Analysis (BEA)
Beige Book Report published by the Federal Reserve which gathers and summarizes anecdotal information on current economic conditions by District and sector.  Regional
Data

Source: Federal Reserve Bank 
Demographics & Housing  
Data Tool Description Source Link
State Population Estimates Program produces annual estimates of the population for the United States, its states, and local areas. Demographic components of population change (births, deaths, and migration) and housing unit estimates are also produced.  Minnesota
Data
National
Data
Source: U.S. Census Bureau & Minnesota State Demographic Center
American Community
Survey (ACS)
Program compiles annual survey estimates of demographic, housing, social, and economic information for all states and local areas with population groups of 65,000 people or more.  Minnesota
& National
Data

Source: U.S. Census Bureau 
Building Permits Survey Program compiles data on the on the number of new housing units authorized by building permits. Data are available monthly, year-to-date, and annually at the national, state, and selected metropolitan area levels. Minnesota
& National
Data

Source: U.S. Census Bureau 
Inflation, Prices, and Productivity  
Data Tool Description Source Link
Consumer Price Index (CPI) Program produces monthly data on the average change in the prices paid for goods and services by households. Consumer price indexes are available by spending item for the U.S., the four Census regions, and some local areas. Regional & National
Data
Source: U.S. Bureau of Labor Statistics (BLS)
Producer Price Index (PPI) Program produces monthly data on the average change in the selling prices for goods, services, and construction received by domestic producers. Producer price indexes are available by industry for the U.S. National
Data
Source: U.S. Bureau of Labor Statistics (BLS)
Employment Cost Trends  Program produces quarterly indexes measuring the change in labor costs (Employment Cost Index - ECI) and quarterly data measuring level of average costs per hour worked (Employer Costs for Employee Compensation - ECEC). Employment costs data are available by compensation type as well as industry and occupation characteristic for the U.S. National
Data
Source: U.S. Bureau of Labor Statistics (BLS)
Labor Productivity and Costs Program produces quarterly and annual measures of labor productivity and costs (LPC) measures for sectors of the U.S. economy. Output per hour and unit labor costs are available for major sectors (U.S. business, non-farm business, manufacturing sectors) and by industry. National
Data
Source: U.S. Bureau of Labor Statistics (BLS)
Tax Revenue & Budget  
Data Tool Description Source Link
Congressional Budget Office (CBO) Produces independent (nonpartisan) analyses of budgetary and economic issues to support the Congressional budget process. National
Data
Source: Congressional Budget Office (CBO)
Internal Revenue Service (IRS) Tax Statistics Provides a wide range of data that describe and measure elements of the U.S. tax system. National
Data
Source: Internal Revenue Service (IRS)
Minnesota Dept. of Revenue Research & Statistics Provides a wide range of data, reports, and analysis that describe and measure elements of Minnesota's tax system. Minnesota
Data
Source: Minnesota Department of Revenue