State Revenue Collections Exceed Projections by $348 Million

The strong state budget provides reassurance that state aids to cities will be fully paid this year and during the 2019 city budget cycle.
(Published Jul 16, 2018)

The state’s net general fund receipts for fiscal year (FY) 2018, which ended on June 30, totals an estimated $22.03 billion, according to the state’s quarterly Revenue and Economic Update. Minnesota Management and Budget (MMB) released the update on July 10.

That revenue amount is $348 million, or 1.6 percent, more than projected in the February 2018 state Budget and Economic Forecast.

—Read MMB’s full July 2018 Revenue and Economic Update (pdf)

The strong state budget provides reassurance that shared state revenue programs, such as local government aid (LGA) and the Small Cities Assistance Account, will be fully paid this year and during the 2019 city budget cycle.

According to MMB, stronger-than-expected net receipts for the individual income tax (+$330 million), corporate income tax (+$20 million), and other tax receipts (+$54 million) more than offset a $56 million reduction in general sales tax revenues.

Reasons for healthy general fund budget
The state general fund budget remains healthy, in part, due to a relatively strong economy, but also because at the end of the 2018 legislative session, the Legislature and Gov. Dayton could not reach agreement on a supplemental budget bill, leaving an estimated positive budgetary balance of $288 million. In addition, the state’s general fund budget reserve is currently funded at $1.61 billion and the state maintains a $350 million cash flow account.

The MMB report only reflects net general fund revenues and does not include any projected revisions to the state’s spending for the balance of the state’s biennium.

Upcoming forecasts
The next state budget forecast will be released sometime in early December. The budget forecast will incorporate new economic estimates for future state revenues and expenditures, as well as actual tax and expenditure data since the last budget forecast was released in February.

The upcoming December state budget forecast could also trigger the automatic transfer of up to one-third of any projected budgetary balance for the fiscal biennium to the state’s budget reserve. The last budget reserve target released by MMB in late 2017 suggested the state’s budget reserve should be set at 4.9 percent of the current biennium’s general fund non-dedicated revenues, or $2.19 billion.

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