Ewald at the Capitol

Looking Ahead to 2023

Despite reaching a global budget agreement, the 2022 regular session ended without a bonding bill, a tax bill, and several other supplemental budget bills. 2023 is a budgeting year, where the legislature and the governor must agree to a two-year state budget. If they fail to do so and a budget is not enacted by June 30, 2023, Minnesota could face a shutdown of state government services.

Control of the 2023 legislature remains uncertain ahead of election day, but a few key factors will certainly come into play for the new legislature. First, 2022 was a redistricting year. Incumbents running for re-election are doing so in seats that are in some cases vastly different than the districts they faced in the last election cycle. Regardless of election results, the 2023 legislature is likely to introduce a near-historic number of new faces onto the scene at the Capitol. A total of 47 legislators retired after the 2022 session, and the count increases to 59 when you include members seeking office in the other body or seeking elected office elsewhere. These retiring legislators represent more than 600 years of experience and knowledge of the legislative and budget processes.

The first weeks following the election will be busy for new and familiar faces alike, regardless of who controls the house and senate. In addition to voting on party leadership, the caucuses will have to sort out committee structure, appoint new committee chairs, and make committee assignments.

Budget Updates

State tax revenues continue to outpace projections ahead of the official budget forecast, which will be out in early December. Recently, the Minnesota Management and Budget Office (MMB) released an update covering tax receipts from July through September. This monthly update shows the net general fund for FY 2023 is now estimated at 7.024 billion, 4.3 percent more than forecast in the February 2022 Budget and Economic Forecast. Corporate and sales taxes are the driving force in the additional $289 million surplus.

Although Minnesota has a large budget surplus and rainy-day reserve to help combat declines in state revenue, MMB warns that continued inflation, a weakening stock market, and the Federal Reserve’s increase in interest rates continue to raise concerns of a recession — which could lead to a decrease in future state revenues.