February 2014
HIGHLIGHTS
Small Revenue Gain Drives Increase in Forecast Balance
The general fund balance expected for FY 2014-15 is now $1.233 billion, $408
million higher than forecast in November. General fund revenues are expected to
be $39.575 billion, $366 million (0.9 percent) above November’s forecast.
Spending is expected to be $39.019 billion, $48 million (0.1 percent) less. These
changes, offset by a $6 million increase in stadium reserves, increased the forecast
balance from the $825 million forecast in November.
Solid Economic Performance, Strong Tax Collections Add to Forecast
Continuing growth in Minnesota employment and income contributes to the
increase in forecast revenues. So far in FY 2014, individual estimated income tax
payments have been higher than expected, but most of this increase is likely due
to taxpayers changing the timing of their payments, rather than higher
tax
liabilities. Forecast tax revenues increased $362 million (1.0 percent) in FY 2014-
15. Higher income and sales tax estimates account for almost all of the gain.
U.S. Economic Outlook Has Improved
Positive momentum at the end of 2013 has contributed to an improved U.S.
economic outlook. In addition, less federal policy uncertainty is increasing
confidence. Global Insight expects economic activity to accelerate through 2015,
fueled by an upturn in consumer spending, improved housing and equipment
investment, and the easing of federal fiscal drag. Real GDP growth is now
forecast to be 2.7 percent in 2014 and 3.3 percent in 2015. November’s baseline
called for 2.5 percent growth in 2014 and 3.1 percent in 2015.
Long Term Budget Outlook Remains Positive
Improved budget outlook continues into FY 2016-17. Without adjusting for
inflation, there is a positive balance of $2.599 billion going into the 2014 session.
Economic changes as well as the nature and timing of any budget changes may
materially affect both revenue and expenditure projections for the next biennium.