Minnesota projects $641 million surplus, fueling talk of business relief

So much for a giant deficit.

Minnesota budget officials said Tuesday they expect a $641 million surplus between now and June, revising their earlier prediction of a $2.4 billion shortfall from the May report. It was good news to Gov. Tim Walz and lawmakers who want to pass a big coronavirus economic relief package.

Uncertainty remains, and a $1.3 billion shortfall is likely for the two-year period that starts July 1, budget officials said. That number is down from a $4.7 billion expected hole in the May report.

"Someone told me this morning they had forgotten you could get good news in 2020," Walz told reporters Tuesday.

As soon as budget officials released the numbers, calls intensified on the Minnesota Legislature to send large cash payments to struggling businesses as they deal with shutdown orders and an economic recession.

“The good news of this forecast means that the Legislature can take immediate steps to help stabilize small and medium-sized businesses and jumpstart economic recovery throughout the state," Minnesota Chamber of Commerce president Doug Loon said in an email.

Walz said Monday that lawmakers had conversations over the weekend and he was hopeful for a deal on an economic relief package this week. The governor, a Democrat in his first term, said he would call the divided Legislature back for a special session with consensus.

Walz and House Democrats have put out the framework of their plan, while House Republicans have also released one. Both plans call for directing hundreds of millions of dollars to businesses affected by Walz's closure orders, though they differ in how the relief would be delivered.

Walz's plan also calls for a 13-week extension of unemployment benefits and an immediate $500 cash payment to roughly 31,000 low-income families. 

"COVID-19 is not hitting everybody evenly, and some of the people who are being hit the hardest need some economic relief to get through these tough times," House Speaker Melissa Hortman, DFL-Brooklyn Park, said. "We should be able to do that."

Republicans who control the Senate have not released a proposal. Senate Majority Leader Paul Gazelka released a video statement on the budget forecast and did not take reporters' questions because of a death in the family, a spokeswoman said Tuesday morning.

House Republicans said they were eager to approve hundreds of millions of dollars in cash grants for the hardest-hit businesses, and said Walz should allow them to reopen.

"Let’s try to figure out how to get businesses open safely. Let’s not try to figure out how to get businesses closed," said House GOP Leader Kurt Daudt of Crown.

Walz hinted Tuesday that he would likely extend the closures of bars, restaurants, gyms, movie theaters and other businesses beyond Dec. 18 -- when his current shutdown order is set to expire -- saying that Minnesota will be at the worst of the pandemic for the next few weeks.

In November, the state recorded 1,553 deaths, 43 percent of the total number since the pandemic started. Hospitals are also filling: the number of Minnesotans hospitalized with the virus doubled in November.

Minnesota has 184,000 fewer jobs since February and the job losses have disproportionately affected lower-wage workers, budget officials cautioned Tuesday.

The budget forecast has seen two dramatic swings this year in the midst of the pandemic.

In February, weeks before the coronavirus pandemic hit Minnesota, budget officials projected a $1.5 billion surplus. In May, as Minnesota grappled to understand how the pandemic would hit the state's economy, budget officials revised their prediction to a $2.4 billion deficit. 

Now, with six months of tax receipts giving a clearer picture, they've revised it back to a surplus, albeit a more modest one than in February.