Ask the Budget Director

There are two important numbers for the state budget. The first is general fund spending. The general fund budget numbers are the ones most likely to be cited in the media and news stories.

The general fund is the largest state fund where most state taxes are deposited, and most state spending for major budget areas occurs. State forecasts and resulting projections of deficits or surpluses focus on the state general fund.

However, this does not represent total state spending. The general fund accounts for approximately 55 percent of total state spending. Other state funds dedicated to specific purposes, as well as federal funding received by the state, make up the additional spending.

State spending estimates for the general fund and all other funds are updated several times each year. For the most current estimates, please visit the Current Operating Budget page for all funds and the Current Estimates of State Budget page for a summary of the general fund.

Income, sales, corporate income, and the statewide property tax are the four largest sources of general fund revenues. Revenue from other taxes including tobacco, alcohol, estate and lawful gambling along with non-tax revenue from fees, investment income and other sources is also deposited in the general fund.

Outside of the general fund, receipts from the federal government are the largest source of revenue followed by taxes, fees and other sources of revenues that are restricted to an explicit use by the constitution, statute or law.  

In general, a diverse revenue system with broad-based taxes is more stable, more likely to align with economic activity, and likely to be less volatile. 

Although most public attention focuses on general fund revenues, a significant portion of the state budget's revenue is non-general funds. Non-general funds are receipts set aside, or "dedicated" for specific purposes. Federal grants are the largest source of non-general fund revenues and constitute roughly one-third of the state’s revenue.

Federal funds are restricted to specific federally authorized programs and cannot be used for general state purposes. The federal government mandates many program requirements as conditions of the grants, and often the states must provide matching funds. Entitlement programs such as Medical Assistance and Temporary Assistance for Needy Families (TANF) are examples of programs that require a significant state contribution. For more information, please see MMB’s Federal Funds Implementation webpage.

The balance of the state’s general fund budget reserve can change; for the most current amount, please see the current operating budget summary page. Just like a family's need to have emergency funds available for unexpected household costs, the state's general fund budget reserve is an important risk management tool to reduce disruptions in state services caused by declines in revenue or expenditure increases related to national economic cycles.

The target balance of the state budget reserve is adjusted each year, based on a recommendation reflecting the volatility of general fund revenue sources by the State Economist in the Budget Reserve report released every October. By statute, 33 percent of any positive unrestricted balance in the current biennium in the general fund is allocated to the budget reserve with each November forecast until the target is reached.

The state general fund also has a separate $350 million cash flow account, primarily to maintain sufficient cash balances during the year to manage significant timing differences between when revenues are collected and payments are made.

MMB provides revenue and expenditure forecasts twice a year. These forecasts are used to determine the size of any deficit or surplus in the state's budget. The November forecast serves as the starting point for the budget and 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.

Expenditure estimates in most spending areas are shown at the level of appropriations set in current law, plus any authorized spending carried forward from prior years. Entitlement programs and open appropriations, such as K-12 general education, intergovernmental aid, health care, and family support, are adjusted for caseload and enrollment changes authorized by law, as well as by formula-driven growth. After determining base expenditures under current-law formulas, the expenditure forecast assumes inflationary growth for programs that do not already have cost growth allowances built into their current-law formulas.

MMB’s Economic Analysis (EA) unit prepares the revenue forecast for the Budget and Economic Forecast. The process starts with a national economic forecast from the state’s economic consulting firm. After EA economists and Minnesota’s Council of Economic Advisors review and approve it as a starting point, EA combines the national outlook with Minnesota-specific economic data. EA uses its own economic model of the Minnesota economy to produce the final revenue forecast.

Forecast information can be found on the Economic Analysis unit’s Forecast Overview page. Forecast documents can be found on the Budget and Economic Forecast page.

The summary of state agencies, programs, and activities is a good starting point. This information, prepared in conjunction with the biennial budget, provides a descriptive overview of the nature, purpose, and performance of state programs and activities. The information typically includes a link to an individual agency's website and a contact for additional information.

The Current Operating and Current Enacted Budgets may also provide some more information regarding specific state agencies or programs, and can be found via the Operating Budget page.

Capital projects include land and buildings and improvements to buildings, such as additions and major renovations. These kinds of assets have useful lives of 20 years or more. Because land acquisition and new building construction are frequently very expensive and would be difficult to fund in one year, the state borrows money to pay for most of its capital projects by issuing general obligation ("G.O.") bonds.

This is similar to how an individual takes out a mortgage loan to buy a home. Under the state constitution, the bonds cannot be outstanding for more than 20 years. This provision makes sure that the length of the loan does not exceed the expected life of the assets financed by the bonds, which would not be sound fiscal policy.

Fiscal notes are documents that estimate how proposed legislation would affect the state budget, including costs, savings, or changes in revenue. The chairs of the House of Representatives Ways and Means Committee, the Senate Finance Committee, or committees to which a bill has been referred may request that fiscal notes be completed for a bill. Fiscal notes are typically prepared by executive branch agencies affected by bills. All fiscal notes must be approved by the Legislative Budget Office (LBO); previously, fiscal notes were approved by Minnesota Management and Budget (MMB). You can find completed fiscal notes on the LBO’s website.

Estimates for the cost of proposed legislative changes to state taxes, local aid, and property tax credit programs follow a different process than fiscal notes. Chairs of the legislative tax committee may request revenue analyses directly from the Department of Revenue on proposed tax bill provisions and language. Revenue's tax research and property tax division completes and publishes revenue analyses for tax provisions of various House and Senate bills. You can find completed revenue notes on the Department of Revenue’s website.

Local impact notes estimate the financial impact on each type of political subdivision resulting from proposed legislation. Political subdivisions include local units of government such as cities, counties, and school districts. Local impact notes may be requested by the chair or ranking minority member of the House or Senate Tax Committee, the House Ways and Means Committee, or the Senate Finance Committee. The law assigns responsibility for coordinating local impact notes to the LBO. You can find completed local impact notes on the LBO’s website.