MMB November 2022 Forecast

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Budget & Economic Forecast November 2022
Statutory Provisions
In accordance with Minnesota Statutes, section 16A.103, subdivision 1, the commissioner of
Minnesota Management and Budget (MMB) must prepare a forecast of state revenue and
expenditures in February and November of each year. This forecast must assume the continuation
of current laws and reasonable estimates of projected growth in the national and state economies
and affected populations.
Revenue must be estimated for all sources provided for in current law. Expenditures must be
estimated for all obligations imposed by law and those projected to occur as a result of variables
outside the control of the legislature. Expenditure estimates must not include an allowance for
inflation.
A forecast prepared during the first fiscal year of a biennium must cover that biennium and the
next biennium. A forecast prepared during the second fiscal year of a biennium must cover that
biennium as well as the next two bienniums.
Notes
Numbers in the text and tables may not add to the totals due to rounding.
Unless otherwise noted, years used to describe the budget outlook are state fiscal years (FY), from
July 1 to June 30, and years used to describe the economic outlook are calendar years (CY).
Wage and price inflation is included in revenue estimates.
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TABLE OF CONTENTS
EXECUTIVE SUMMARY 1
ECONOMIC OUTLOOK 14
U.S. Economic Outlook 14

Minnesota Economic Outlook 31
Council of Economic Advisors’ Statement 42
BUDGET OUTLOOK 46
Current Biennium 46
Next Biennium 50
Planning Estimates 52
REVENUE OUTLOOK 54
Current Biennium 54
Next Biennium 61
EXPENDITURE OUTLOOK 66
Current Biennium 66
Next Biennium 71
APPENDIX 78
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EXECUTIVE SUMMARY
Minnesota’s budget and economic outlook remains stable and resilient. Strong collections and
lower than projected spending add $4.556 billion to the general fund bottom line in the current
biennium. Despite a mild U.S. recession projected for 2023 and a lower tax revenue forecast in
the next biennium, the large leftover surplus from the current biennium carries into FY 2024-25
and combines with significant structural balance to generate a projected $17.616 billion balance
available for the next budget. Revenues are forecast to exceed spending throughout the five year
budget horizon, but slower projected economic growth through 2027 poses risk to the forecast.
U.S. Economic Outlook. Since Minnesota’s Budget and Economic Forecast was last prepared in
February, the global and U.S. economies have seen dramatic changes. These include the Russian
invasion of Ukraine, high inflation, and six Federal Reserve actions to raise interest rates. As a
result of these factors, the outlook for U.S. real GDP has weakened. IHS Markit (IHS), Minnesota’s
macroeconomic consultant now expects tighter financial conditions to weaken investment in
interest rate-sensitive sectors (such as housing), inducing a mild, three-quarter recession
beginning in the fourth quarter of 2022. In their November forecast, IHS expects annual real GDP
to grow 1.8 percent this year, less than half of the 3.7 percent growth they expected in the
February forecast. IHS expects real GDP to decline 0.2 percent next year, as the U.S. economy
moves through a recession, with unemployment rising to 5.7 percent. In February, IHS expected
real GDP to increase 2.7 percent in 2023 and unemployment to average 3.5 percent.
IHS expects this will be a mild recession by historical standards, with a 0.7 percent peak-to-trough
decline in real GDP, compared to the average, pre-2008 recessionary decline of 1.7 percent. A
weak recovery is forecast to begin in the third quarter of 2023. They forecast real GDP to increase
1.3 percent in 2024, half the growth rate they expected in February. Slower growth is projected
through the years of our forecast, with average annual increases in real GDP of 1.9 percent in
2025-27, down from an average of 2.5 percent per year in the prior forecast. This is due to lower
forecasts for both productivity—which has notably declined this year—and the size of the U.S.
labor force. This slower growth makes the economy more vulnerable to negative shocks, as there
is less room for the economy to recover from a setback than when growth is faster.
This recession is expected to be investment-driven, with declines in investment spending in 2022,

2023, and 2024. Within investment, the residential sector is assumed to be hit hardest by
tightened financial conditions. IHS expects consumer spending to grow 1.9 percentage points
more slowly in each of 2023 and 2024 than they forecast in February, although it does not decline
in either year.
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IHS now expects U.S. real GDP to grow 1.8 percent in 2022, a 1.9 percentage point decrease from
IHS’ February baseline forecast. IHS expects GDP to decline 0.2 percent in 2023, followed by 1.3
percent growth in 2024, and an average of 1.8 percent growth in years 2025-2027.
In early 2022, the Russian invasion of Ukraine disrupted supply of natural gas and some
agricultural commodities, exacerbating already high food and energy price inflation. In recent
months inflation has expanded to the services sector including airfare, medical services, housing,
and transportation. IHS now expects annual CPI inflation of 8.1 percent in 2022, 3.6 percentage
points higher than they forecast in February. Since the middle of the year, oil prices have fallen,
helping to bring CPI inflation down from its summertime peak. IHS expects slower economic
growth, supply-chain normalization, and the eventual softening of labor market conditions to
continue to bring down inflation. They forecast CPI inflation to fall to 4.3 percent in 2023 and
further to 2.7 percent in 2024. They expect CPI inflation to average 2.2 percent annually in years
2025 to 2027.
To combat high inflation, the Federal Reserve has raised their policy rate, the federal funds rate,
six times this year including four consecutive 75 basis-point increases. These actions have resulted
in a cumulative increase of 375 basis points, bringing the target range to 3.75 to 4.0 percent. IHS
now expects the Fed to raise its policy rate range to 4.75 to 5.0 percent by March 2023. In the IHS
November forecast, the Fed reverses course in the spring of 2024 and brings the rate below 3.0
percent in 2025.
Although IHS expects real GDP to decline in the fourth quarter of 2022 and the first two quarters
of 2023, they expect that real consumer spending will continue to post growth in 2022 and 2023.
The outlook for consumer spending assumes that higher consumer loan interest rates and rising
unemployment will restrain spending growth in 2023.
During March and April 2020, the U.S. shed 22.0 million jobs. Since May 2020, the U.S. has added
jobs nearly every month. In August 2022, the U.S. surpassed the pre-pandemic level of
employment. In January through July 2022, the U.S. added an average of 457,000 jobs per month.
Employment growth has decelerated, adding an average of 289,000 jobs per month in the past
three months. IHS forecasts payroll employment to increase by 5.9 million in 2022, decline by
2
534,000 over the course of 2023 and 2024, and rise by an average of 729,000 jobs per year in
years 2025-2027. With GDP declining in 2023, IHS expects the unemployment rate to rise to 5.7
percent by late 2024 before decelerating to 4.5 percent by 2026.
The current baseline forecast hinges critically on the Fed’s ability to curb inflation. IHS assumes
the Fed will raise the fed funds rate to 4.85 percent by mid-2023 before gradually decelerating to
below 3.0 percent in 2025. As a result, IHS expects inflation to slow to 4.3 percent in 2023 and 2.7
percent in 2024. If inflation persists above this level, the Fed may act more aggressively to raise
interest rates than assumed in the baseline forecast.
Minnesota Economic Outlook. With the U.S. economic outlook now incorporating a three-
quarter recession, the economic outlook for Minnesota has weakened since MMB’s Budget and
Economic Forecast was prepared in February 2022. Nevertheless, Minnesota’s labor market
remains one of the tightest in the nation, with the lowest unemployment rate and the fifth highest
labor force participation rate in the U.S. As of October, Minnesota employers have added jobs for
13 consecutive months, growing employment 3.6 percent over the last 12 months and adding an
average of 9,000 additional jobs per month in 2022. October posted the strongest month of 2022
to date, with an addition of 17,400 jobs in the state.
In this forecast, a weakened U.S. outlook for consumer spending, wage and salary growth, total
employment, and personal income drives our expectation that Minnesota’s employment and
wage growth will decelerate in 2023 and 2024. An aging labor force constrains Minnesota’s
employment growth through the forecast horizon. Minnesota’s economic outlook is informed by
the IHS forecasts for both the U.S. and for Minnesota, data from the Minnesota Department of
Economic and Employment Development (DEED), Quarterly Census of Employment and Wages
(QCEW), Minnesota tax revenues, and our own forecast modelling.
Minnesota’s seasonally adjusted October unemployment rate of 2.1 percent is the lowest among
U.S. states and 1.6 percentage points below the U.S. unemployment rate of 3.7 percent.
The unemployment rate does not capture Minnesotans that have left the labor force, including
retirements or those staying home to care for children. Since the onset of the pandemic in
February 2020, Minnesota’s labor force has fallen by 92,000, and the state’s labor force
participation rate has declined by 2.8 percentage points. Nevertheless, at 68.0 percent,
Minnesota’s labor force participation rate remains 5.8 percentage points above the U.S. rate of
62.2 percent and is the fifth highest among U.S. states. This means there is little slack in
Minnesota’s labor market compared to other parts of the country.
After growing 2.3 percent in 2021, we forecast that Minnesota employment will grow 3.1 percent
this year, slow to 0.3 percent in 2023 and then flatten through 2024. From 2025 to 2027 we expect
employment growth to average 0.5 percent, or 14,300 jobs per year. Minnesota’s employment
growth is constrained throughout the forecast horizon by lower levels of immigration into
Minnesota and an aging labor force moving into retirement. Total Minnesota wage income, the
sum of all wages distributed in the state, grew 7.2 percent in 2021. We expect strong wage growth
to continue at a rate of 6.9 percent in 2022 before decelerating to 4.5 percent in 2023 and an
average of 5.0 percent for years 2024-2027. Strong total wage growth along with slowing
employment growth means that we expect increases in wage and salary income per worker.
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Budget Outlook: Current Biennium. When the last Budget and Economic Forecast was released
in February 2022, a surplus of $9.253 billion was projected for the current biennium. Legislative
action appropriating supplemental spending and adjusting general fund resources in the 2022
session reduced the projected balance to $7.049 billion. Since then, actual collections have
exceeded forecast and estimated spending has been reduced. With this release, the current
biennium is now expected to conclude with a budgetary surplus of $11.605 billion.
Current Biennium: FY 2022-23 General Fund Budget

Change From End-of-Session Estimates
November 2022 $
($ in millions) End of Session Forecast Change
Beginning Balance $7,026 $7,026 $ -
Forecast Revenues 56,655 59,928 3,273
Projected Spending 53,299 51,779 (1,521)
Budget Reserve 2,656 2,852 196
Cash Flow Account 350 350 -
Stadium Reserve 327 368 41
Forecast Balance $7,049 $11,605 $4,556
Revenues. Total general fund revenues for FY 2022-23 are now forecast to be $59.928 billion,
$3.273 billion (5.8 percent) more than the February 2022 forecast. Total tax revenues for the
biennium are forecast to be $57.303 billion, $2.709 billion (5.0 percent) above the prior estimate.
The forecasts for Minnesota’s three largest tax types are higher than in February. This is the third
forecast of FY 2022-23 since FY 2022 began on July 1, 2021. After 16 months of observed
collections, fiscal year-to-date tax and non-tax revenues for FY 2022-23 are $39.582 billion, 66
percent of the total expected over the biennium. These higher revenues raise the base—or
starting point—for our forecasts of several tax types.
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Current Biennium: FY 2022-23 General Fund Revenues

End-of-Session vs. November 2022 Forecast Comparison
November
End-of- 2022 $ %
($ in millions) Session Forecast Change Change
Individual Income Tax $30,174 $31,959 $1,785 5.9%
General Sales Tax 13,822 14,092 269 1.9
Corporate Franchise Tax 4,427 5,183 756 17.1
State General Property Tax 1,536 1,534 -2 -0.1
Other Tax Revenue 4,635 4,535 -99 -2.1
Total Tax Revenues $54,594 57,303 2,709 5.0%
Non-Tax Revenues 1,626 2,116 490 30.1
Other Resources 435 509 75 17.2
Total Revenues $56,655 $59,928 $3,273 5.8%
Net individual income tax receipts are now forecast to be $1.785 billion (5.9 percent) more than
the February forecast adjusted for law changes. The increase is primarily due to a higher estimate
of base year (TY 2021) tax liability and higher forecast growth in non-wage income.
Our higher estimate of base year income tax liability is informed by higher-than-expected tax
receipts through FY 2022. At the close of FY 2022, net income tax revenue was $2.396 billion (16.5
percent) more than forecast. The positive variance was primarily due to higher-than-expected
income tax payments and lower than expected refunds for tax year 2021. So far in FY 2023, net
income tax receipts are $58.8 million (1.3 percent) more than forecast.
Net general sales tax revenue in FY 2022-23 is now forecast to be $269 million (1.9 percent) more
than the prior estimate. Both an increase in forecast gross sales tax receipts and a reduction in
expected refunds contribute to the change. The increased forecast in the current biennium for
gross sales tax receipts reflects higher than expected gross receipts so far in FY 2023 and a higher
near-term forecast for taxable sales compared to February. Using forecasts for spending on a wide
range of taxable goods and services, we construct the Minnesota synthetic sales tax base, a proxy
for the actual sales tax base. The synthetic base grew 1.1 percentage points faster in FY 2022 than
we forecast in February. In this forecast the base is expected to grow 0.9 percentage points faster
in FY 2023 than we expected in February.
The corporate franchise tax is forecast to generate $5.183 billion in FY 2022-23, $756 million (17.1
percent) more than the prior estimate. A higher base of gross corporate tax receipts is the primary
driver of this change. At the close of FY 2022, net corporate tax receipts exceeded the February
forecast (adjusted for law changes) by $447 million (18.8 percent). Year-to-date net receipts for
FY 2023 are $93 million above the law-change-adjusted prior forecast.
Non-tax revenues in FY 2022-23 are now expected to be $490 million (30.1 percent) higher than
our February forecast. This is primarily due to an increased forecast for investment income, which
is expected to be $412 million higher than our prior estimate. Higher expected interest rates and
a larger cash balance drive this forecast change.
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The current forecast for FY 2024-25 total revenues is $410 million (0.7 percent) more than the
end-of-session estimate. Total tax revenues for the next biennium are forecast to be $288 million
(0.5 percent) below the prior estimate. A lower forecast for individual income tax receipts, other
tax revenues, and state general property tax revenues are partially offset by higher forecasts for
general sales tax revenues and corporate tax receipts. A forecast change of $701 million (44.8
percent) in non-tax revenues more than offsets the lower forecast for tax revenues.
Next Biennium: FY 2024-25 General Fund Revenues

November
End-of- 2022 $ %
Individual Income Tax $33,140 $32,165 ($975) -2.9%
Total Tax Revenues $58,106 $57,818 ($288) -0.5%
Non-Tax Revenues 1,565 2,266 701 44.8
Other Resources 200 197 -3 -1.6
Total Revenues $59,871 $60,281 $410 0.7%
In FY 2024-25, the income tax forecast is $975 million (2.9 percent) lower than the prior estimate.
This change is primarily driven by lower assumed wage and non-wage income. In addition, the
inflation measure that is used to index Minnesota tax brackets and other parameters is now
forecast to be higher than it had been in February. This has the effect of reducing forecast liability
in TY 2023 by $100 million (primarily lowering revenues in FY 2024) and TY 2024 by $318 million
(primarily lowering revenues in FY 2025).
Net sales tax receipts for FY 2024-25 are now forecast to be $92 million (0.6 percent) more than
the prior estimate. The change is due to a higher base of gross sales tax receipts from the higher
forecast for FY 2022-23, which is partially offset by lower forecast growth in taxable sales for FY
2024-25.
Net corporate tax receipts for FY 2024-25 are now forecast to be $832 million (22.8 percent)
higher than the prior estimate. The change is due to a higher base of gross corporate tax receipts
expected in FY 2022-23, which more than offsets a lower forecast for corporate profits.
As in the current biennium, a higher forecast for investment income drives a $701 million (44.8
percent) increase in expected non-tax revenues in FY 2024-25.
Expenditures. Total spending in the FY 2022-23 biennium is lower than prior estimates.
Expenditures in the current biennium are now expected to be $51.778 billion, a reduction of
$1.521 billion (2.9 percent) from end-of-session estimates.
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A $1.103 billion (6.8 percent) reduction in estimated spending for health and human services
(HHS) and a $280 million (1.4 percent) reduction in estimated spending for E-12 education
account for nearly all of the overall reduction in spending in the FY 2022-23 biennium.
Changes for the current biennium for other spending were modest. Debt service expenditures are
$43 million (3.6 percent) lower than previous estimates primarily due to slower-than-expected
spending on capital projects, resulting in a smaller-than-expected August 2022 bond sale.
Property tax aids and credits spending is $5 million (0.1 percent) lower than expected largely
attributable to FY 2022 actual payments for the homestead credit refund and renters’ property
tax refund coming in lower than expected.
Current Biennium: FY 2022-23 General Fund Expenditures

Change from End-of-Session Estimates
November 2022 $ %
($ in millions) End of Session Forecast Change Change
E-12 Education $20,503 $20,223 $(280) (1.4)%
Property Tax Aids & Credits 4,654 4,649 (5) (0.1)
Health & Human Services 16,337 15,234 (1,103) (6.8)
Debt Service 1,183 1,140 (43) (3.6)
All Other 10,622 10,532 (90) (0.8)
Total Expenditures $53,299 $51,778 $(1,521) (2.9)%
Reserves. Minnesota Statutes 16A.152 directs MMB to allocate funds to the budget reserve
account up to the recommended budget reserve level when there is a projected surplus in the
current biennium in the November Budget and Economic Forecast. In September, MMB, in
accordance with Minnesota Statutes section 16A.152 subd.8, recommends a budget reserve
target of 4.8 percent. When calculated using the updated revenue forecast with this release, the
budget reserve target level is $2.852 billion. Given the reserve balance at the end of FY 2022 was
below the new target level, funds from the projected surplus are allocated so that the reserve
balance is now at the target level of $2.852 billion. The cash flow account balance is unchanged
at $350 million.
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Over the last 10 years the reserve balance has significantly largely increased due to a law change
that sets a reserve target based on the volatility of the state’s revenue sources and allows for
automatic allocation to the reserve when there is a projected balance at the time to the November
Budget and Economic Forecast. The reserve balance as of this release is $2.852 billion after an
allocation of $196 million in FY 2023.
The FY 2023 projected balance of the stadium reserve account is $368 million, $41 million higher
than end-of-session estimates. In FY 2022, lawful gambling revenue available for stadium uses
was $145 million. Annual lawful gambling revenue available for stadium uses is expected to grow
to $199 million by the end of FY 2027.
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The stadium general reserve account was expected to grow year over year when end of session
estimates were released. With revenues for stadium uses increasing at a faster rate in the
November 2022 forecast versus previous end of session estimates, the reserve is now projected to
grow to $1.031 billion by the end of FY 2027.
Total state expenditures for the stadium, including those the state makes on behalf of the City of
Minneapolis, were $43 million in FY 2022 and are expected to be $45 million per year through FY
2027. All revenue in excess of spending amounts is allocated to the stadium reserve. In FY 2023,
$139 million is expected to be added to the stadium reserve. By FY 2027 the amount allocated to
the reserve is expected to be $177 million. Given the increasing allocation amounts, the stadium
reserve balance is expected to reach $1.031 billion by FY 2027.
Next Biennium: FY 2024-25 General Fund Budget

November 2022 $
Beginning Balance $10,382 $15,175 $4,794
Forecast Revenues 59,871 60,281 410
Projected Spending 54,553 53,953 (600)
Balance Before Reserve $15,699 $21,503 $5,804
Budgetary Balance $12,112 $17,616 $5,504
Budget Outlook: Next Biennium. At the end of the 2022 legislative session, the general fund
balance for the next biennium was projected to reach $12.112 billion. The larger projected
surplus for the current biennium, along with reduced base spending estimates and a small
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forecast revenue increase result in a projected balance of $17.616 billion. The majority of the
projected balance in the FY 2024-25 biennium is due to the $11.605 billion unallocated surplus
left-over from FY 2022-23. Of the projected balance, only $6.011 billion is generated by revenues
forecast for the biennium less base spending estimates.
The projected FY 2024-25 balance is not considered a surplus because it is estimated using
projected revenues and base spending estimates before appropriations for the FY 2024-25 budget
are enacted by the 2023 legislature. The projected balance is a starting point for the Governor’s
budget recommendations and the legislature’s budget setting process. When compared to
revised forecast estimates for the current biennium, general fund revenue in FY 2024-25 is
projected to increase $353 million (0.9 percent) while spending is expected to grow $2.175 billion
(4.2 percent) compared to the current biennium.

Biennial Comparison; November 2022 Forecast
$ %
($ in millions) FY 2022-23 FY 2024-25 Change Change
Beginning Balance $7,026 $15,175 $8,149 116.0%
Revenues Blank Blank Blank Blank
Taxes 57,303 57,818 515 0.9
Non-Tax Revenues 2,116 2,266 151 7.1
Transfers, Other Resources 509 197 (313) (61.4)
Total Revenues $59,928 $60,281 $353 0.6%
Expenditures Blank Blank Blank Blank
E-12 Education 20,223 21,252 1,029 5.1
Property Tax Aids 4,649 4,473 (176) (3.8)
Health & Human Services 15,234 17,811 2,578 16.9
Debt Service 1,140 1,147 7 0.6
All Other 10,533 9,271 (1,262) (12.0)
Total Expenditures $51,779 $53,953 $2,175 4.2%
Budget Reserve 2,852 2,852 -
Revenue projections are based on current law and forecast economic growth, while spending
estimates for the next biennium assume that current funding levels and policies continue
unchanged, adjusted only for caseload and enrollment changes as well as specific formula-driven
items. The expenditure forecast does not assume inflationary cost growth outside of a limited
number of specific budget areas including a portion of health care spending, debt service, special
education and property tax refunds.
Revenues. The current forecast for FY 2024-25 total revenues is $410 million (0.7 percent) more
than the end-of-session estimate. Total tax revenues for the next biennium are forecast to be
$288 million (0.5 percent) below the prior estimate. A lower forecast for individual income tax
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receipts, other tax revenues, and state general property tax revenues are partially offset by higher
forecasts for general sales tax revenues and corporate tax receipts. A forecast change of $701
million (44.8 percent) in non-tax revenues more than offsets the lower forecast for tax revenues.

November
End-of- 2022 $ %
Individual Income Tax $33,140 $32,165 $(975) -2.9%
State General Property Tax 1,497 1,492 (5) -0.3
Other Tax Revenue 4,751 4,519 (232) -4.9
Total Tax Revenues $58,106 $57,818 $(288) -0.5%
Non-Tax Revenues 1,565 2,266 701 44.8
Other Resources 200 197 (3) -1.6
Total Revenues $59,871 $60,281 $410 0.7%
The income tax forecast change is due to both lower forecast gross income tax receipts—driven
by lower income growth—and higher forecast refunds. Growth in both wage and non-wage
income sources are lower in this forecast than in February. Compared to our February forecast,
wage income combined with UI benefits on Minnesota tax returns is forecast to be 2.3. 2.1, and
1.0 percent lower in CY 2023, 2024, and 2025, respectively.
Higher expected sales tax refunds partially offset higher expected gross sales tax receipts to bring
the net sales tax forecast $92 million higher than the end-of-session estimate. The forecast change
is due to a higher base of gross sales tax receipts from the higher forecast for FY 2022-23 partially
offset by lower forecasted growth in taxable sales for FY 2024-25.
Net corporate receipts are now forecast to be $832 million (22.8 percent) more than the prior
estimate. The forecast change is due to a higher base of gross corporate tax receipts expected in
FY 2022-23, which offsets a lower forecast for corporate profits.
Expenditures. Base level expenditures in the next biennium are expected reach $53.953 billion,
an increase of $2.175 billion (4.2 percent) compared to the current budget. The two largest
expenditures, E-12 education and health and human services (HHS), drive the biennial growth. In
HHS, growth in medical assistance spending (MA) drives the majority of the $2.578 billion (16.9
percent) change. E-12 spending is expected to grow $1.029 billion (5.1 percent) due to higher
compensatory aid and special education spending. Spending for property tax aids and credits is
expected to be $176 million (3.8 percent) lower than the current biennium due to $500 million in
one-time payments to frontline workers in FY 2023. Offsetting the overall growth is $1.262 billion
(12.0 percent) lower spending in the other areas of state government, due in large part to one-
time spending in FY 2022-23.
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Next Biennium: FY 2024-25 General Fund Expenditures

$ %
E-12 Education $20,223 $21,252 $1,029 5.1
Debt Service 1,140 1,147 7 0.6
All Other 10,533 9,271 (1,262) (12.0)
Compared to prior estimates spending in the FY 2024-25 biennium is expected to be down $598
million (1.1 percent). A reduction in HHS spending estimates, largely driven by lower managed
care payments, explains more than all of the change. These reductions are partially offset by
higher than anticipated spending in property tax aids and credits, primarily due to increases in the
property tax refund program. E-12 spending is relatively unchanged, driven by two offsetting
items: an increase in compensatory revenue and a decrease in projected pupils. Other areas of
the state budget have little change compared to prior estimates.

Change from End-of-Session
November 2022 $ %
E-12 Education $21,242 $21,252 $9 0.0%
Property Tax Aids & Credits 4,343 4,473 130 3.0
Health & Human Services 18,533 17,811 (722) (3.9)
Debt Service 1,149 1,147 (2) (0.2)
All Other 9,286 9,272 (14) (0.2)
Total Expenditures $54,553 $53,955 ($598) (1.1%)
Budget Outlook: Planning Estimates. This forecast provides the first planning estimates for the
FY 2026-27 biennium. While these estimates inherently carry a higher degree of uncertainty than
estimates for FY 2023-25, they do present an outlook of longer run spending and revenue growth
that will assist in budget planning when setting the FY 2024-25 budget.
Revenue projections for FY 2024-27 are based on IHS’s February Baseline forecast for the planning
years. Expenditure projections assume that current law funding levels and policies continue
unchanged, adjusted for caseload and enrollment changes authorized in law, as well as formula-
driven growth. The expenditure forecast does not assume cost growth outside of a few specific
budget areas where assumptions for price increases or market conditions are specified by statute.
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Planning Horizon: General Fund Budget

By Biennium, FY2024-27, November 2022 Forecast
$ Annual %
Forecast Revenues $60,281 $64,591 $4,310 3.5%
Projected Spending 53,953 56,161 2,208 2.0%
Difference $6,327 $8,430
Estimated Inflation (CPI) 1
$1,552 $3,309
To highlight structural balance, the table shows forecast revenues and projected spending and
excludes the impact of balances from prior years and reserves. In the FY 2024-25 biennium
forecast revenue is expected to exceed base level spending by $6.327 billion and in FY 2026-27
the structural balance is expected to grow to $8.430 billion due to revenue growth outpacing base
level spending growth.
Projected inflationary growth based on the Consumer Price Index is now forecast to be 3.0 percent
in FY 2024 and 2.5 percent in FY 2025. In the planning biennium inflation growth is expected to
be 2.2 percent per year in FY 2026 and FY 2027. After adjusting for programs with price increases
included in the current law formula, applying the annual inflation rate – compounded over 2 and
4 years – would add approximately $1.552 billion in spending pressure to the FY 2024-25 biennium
and $3.309 billion to FY 2026-27.
Since the biennial budget was enacted for the current biennium in the summer of 2021, actual
inflation experienced in FY 2021-23 has been significantly higher than assumed when
appropriations were set. The standard methodology used to calculate inflation in this document
accounts for projected inflationary growth into the next biennium and the planning estimates (FY
2024-27) but does not factor in any changes in inflation for the current biennium since the budget
for FY 2022-23 was enacted. The current circumstance, in which inflation in the current biennium
is materially higher than when the budget was enacted, could result in state agencies and
programs experiencing inflationary cost pressures that current appropriation levels do not
anticipate and those cost pressures are not reflected in the base nor the calculated impact of
inflation in FY 2024-27 base spending levels.
Planning estimates are not intended to predict surpluses or deficits four years into the future;
rather, their purpose is to assist in determining how closely ongoing expenditures are likely to
match future revenues based on trends in the economy and the level of spending that is needed
to maintain programs and services. The FY 2026-27 planning estimates provide an important
baseline against which the longer-term impacts and affordability of budget decisions can be
measured.
1
Inflation calculation grows the estimated general fund spending base in each year by the projected CPI
growth rate after removing special education, debt service, property tax refunds, and the state share for
managed and long term care in HHS.
13
ECONOMIC OUTLOOK
U.S. Economic Outlook

Since Minnesota’s Budget and Economic Forecast was last prepared in February, the global and
U.S. economies have seen dramatic changes. These include the Russian invasion of Ukraine, high
inflation, and six Federal Reserve actions to raise interest rates. As a result of these factors, the
outlook for U.S. real GDP has weakened. IHS Markit (IHS), Minnesota’s macroeconomic consultant
now expects tighter financial conditions to weaken investment in interest rate-sensitive sectors
(such as housing), inducing a mild, three-quarter recession beginning in the fourth quarter of
2022. In their November forecast, IHS expects annual real GDP to grow 1.8 percent this year, less
than half of the 3.7 percent growth they expected in the February forecast. IHS expects real GDP
to decline 0.2 percent next year, as the U.S. economy moves through a recession, with
unemployment rising to 5.7 percent. In February, IHS expected real GDP to increase 2.7 percent
in 2023 and unemployment to average 3.5 percent.
IHS now expects U.S. real GDP to grow 1.8 percent in 2022, a 1.9 percentage point decrease from
IHS’ February baseline forecast. IHS expects GDP to decline 0.2 percent in 2023, followed by 1.3
percent growth in 2024, and an average of 1.8 percent growth in years 2025-2027.
IHS expects this will be a mild recession by historical standards, with a 0.7 percent peak-to-trough
decline in real GDP, compared to the average, pre-2008 recessionary decline of 1.7 percent. A
weak recovery is forecast to begin in the third quarter of 2023. They forecast real GDP to increase
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1.3 percent in 2024, half the growth rate they expected in February. Slower growth is projected
through the years of our forecast, with average annual increases in real GDP of 1.9 percent in
2025-27, down from an average of 2.5 percent per year in the prior forecast. This is due to lower
forecasts for both productivity—which has notably declined this year—and the size of the U.S.
labor force.
During most of this year, IHS was forecasting “growth recession”—with GDP growth below
potential and upward pressure on the unemployment rate. As of their November outlook, IHS is
expecting a “true recession,” with contracting real GDP. The downward revision in the near-term
economic outlook between IHS’ October and November forecasts is the result of three factors.
First, persistently higher than anticipated inflation led the Federal Open Market Committee
(FOMC) to increase the federal funds rate by 75 basis points at the November meeting, the fourth
consecutive increase of this magnitude. Second, the FOMC signaled a commitment to fighting
inflation even at the risk of a recession. Third, in response to these developments, financial market
conditions tightened considerably. Stock and bond prices fell, the dollar appreciated, and spreads
between Treasuries and private bonds have widened.
IHS expects this will be a mild recession by historical standards with a weak recovery beginning in
the third quarter of 2023. Since the NBER began tracking U.S. recessions, there have been twelve
recessions with an average peak-to-trough decline in real GDP for these twelve recessions of about
2.5 percentage points. The peak-to-trough decline in real GDP in IHS' near-term recession forecast
is 0.7 percent with unemployment peaking at 5.7 percent in 2023.
This recession is expected to be investment-driven, with declines in investment spending in 2022,

2023, and 2024. Within investment, the residential sector is assumed to be hit hardest by
tightened financial conditions. IHS expects consumer spending to grow 1.9 percentage points
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more slowly in each of 2023 and 2024 than they forecast in February, although it does not decline
in either year.
BEA’s third estimate of real GDP for the second quarter of 2022 shows a decline of 0.6 percent
(annual rate), following a decline of 1.6 percent in the first quarter. IHS now expects real GDP to
grow 2.6 percent in the third quarter and decline 0.4 percent in the fourth, compared to 2.9 and
2.7 percent growth in the February forecast. In this forecast, the fourth quarter of 2022 is the first
of three consecutive quarters of real GDP contraction.
The Business Cycle Dating Committee of the National Bureau for Economic Research (NBER)
maintains the history of U.S. business cycles including the peaks and troughs that define each
recession. Since 1948, there have been twelve recessions with an average peak-to-trough decline
in real GDP of about 2.5 percent. For the recessions following 2008, the average has been 1.7
percent. The peak-to-trough decline in real GDP in IHS' near-term recession forecast is 0.7
percent, which would make the recession mild by historical standards.
Inflation. In early 2022, the Russian invasion of Ukraine disrupted supply of natural gas and some
agricultural commodities, exacerbating already high food and energy price inflation. In recent
months inflation has expanded to the services sector including airfare, medical services, housing,
and transportation. IHS now expects annual CPI inflation of 8.1 percent in 2022, 3.6 percentage
points higher than they forecast in February. Since the middle of the year, oil prices have fallen,
helping to bring CPI inflation down from its summertime peak. IHS expects slower economic
growth, supply-chain normalization, and the eventual softening of labor market conditions to
continue to bring down inflation. They forecast CPI inflation to fall to 4.3 percent in 2023 and
further to 2.7 percent in 2024. They expect CPI inflation to average 2.2 percent annually in years
2025 to 2027.
IHS has raised their forecast of Consumer Price Index (CPI) inflation in 2022 to 8.1 percent from 4.5
percent in their February outlook. For 2023, they now expect 4.3 percent inflation compared to 1.9
percent in February. IHS expects slower economic growth, supply-chain normalization, and the
eventual softening of labor market conditions to continue to bring down inflation.
Monetary Policy. To combat high inflation, the Federal Reserve has raised their policy rate, the
federal funds rate, six times this year including four consecutive 75 basis-point increases. These
actions have resulted in a cumulative increase of 375 basis points, bringing the target range to
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3.75 to 4.0 percent. IHS now expects the Fed to raise its policy rate range to 4.75 to 5.0 percent
by March 2023. In the IHS November forecast, the Fed reverses course in the spring of 2024 and
brings the rate below 3.0 percent in 2025.
The Federal Reserve has increased its policy rate, the federal funds rate, by 375 total basis points
since February 2022. In their current outlook, IHS now expects the Fed to raise its policy rate range
to 4.75 to 5.0 percent by March 2023, before unwinding to fall below 3.0 percent in 2025.
Corporate Profits. Before-tax corporate profits grew 31 percent in 2021, and IHS expects profits will
grow 9.4 percent in 2022. IHS expects corporate profits will continue to grow in the first quarter of
calendar year 2023, followed by a three-quarter decline which will result in a year over year decline
of 2.7 percent in 2023. IHS expects modest increases of 1.4 percent and 2.0 percent in 2024 and
2025.
Federal Fiscal Policy. The November IHS forecast reflects the impact of all federal relief packages
enacted in 2020 as well as the $1.9 trillion American Recovery Plan (ARP) enacted in March 2021.
The forecast also includes the impact of the Infrastructure Investment and Jobs Act (IIJA) enacted
in November 2021, the Consolidated Appropriations Act of 2022 funding federal government for
fiscal year 2022 enacted March 2022, the Inflation Reduction Act enacted in August 2022, and
assumes current tax policy. IHS has not included the impact of student loan debt forgiveness in
the baseline or alternative forecasts.
Real Consumer Spending. Although IHS expects real GDP to decline in the fourth quarter of 2022
and the first two quarters of 2023, they expect that real consumer spending will continue to post
growth in 2022 and 2023. The outlook for consumer spending assumes that higher consumer loan
interest rates and rising unemployment will restrain spending growth in 2023.
IHS now expects consumer spending to grow 2.7 percent in 2022, 0.8 percent in 2023, and 1.1
percent in 2024, a significant decrease from the February forecast. Growth then accelerates in
years in years 2025-2027, averaging 1.9 percent annually, but still at lower rates than IHS expected
in their February forecast. IHS expects consumer spending to remain the primary contributor to
growth in the economy, even as they have lowered their consumer spending forecast.
17
IHS now expects consumer spending to grow 2.7 percent in 2022, 0.8 percent in 2023, and 1.1
percent in 2024, a significant decrease from the February forecast. Growth then accelerates in
years in years 2025-2027, averaging 1.9 percent annually, but still at lower rates than IHS expected
in February.
Real consumer spending has remained resilient over the past year even in the face of high
inflation. Spending has increased 2.1 percent over the first nine months of 2022, despite the fact
that real disposable income has decreased 2.3 percent. This indicates that consumers are finding
ways to continue spending even as prices outgrow nominal income. Two important ways that
consumers have maintained their spending are by reducing their saving and increasing their use
of credit to fund purchases. Revolving consumer credit has increased 11.6 percent in the first nine
months of 2022 and is now 6.6 percent higher than in February 2020. The personal saving rate
has averaged 3.7 percent in 2022, down from the extraordinarily high 2021 average rate of 11.8
percent.
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Real consumer spending has grown 2.1 percent over the first nine months of 2022, despite the fact
that real disposable income has decreased 2.3 percent. Revolving consumer credit has increased
11.6 percent in 2022. The personal saving rate has averaged 3.7 percent in 2022 after averaging
an extraordinarily high 11.8 percent in 2021.
Real disposable personal income increased substantially during 2020 and 2021, increasing 6.2
percent and 1.9 percent respectively. Growth in disposable personal income was strongly
influenced by pandemic-related government payments. Individuals benefited from federal
transfer payments in the form of stimulus checks and emergency unemployment insurance
benefits. IHS expects real disposable income to decline by 6.2 percent in 2022, as federal transfer
payments significantly decline and consumers spend down savings in the face of rising prices over
the course of the year. Declining food and gasoline prices are expected to support growth of real
disposable income, which is forecast to grow at annual rates of 3.0 and 3.3 percent in 2023 and
2024, respectively.
The growth in disposable personal income in 2020 and 2021 was accompanied by a significant
increase in personal saving. Between 2009 and 2019, the U.S. household saving rate averaged 7.2
percent annually. Fueled by federal transfer payments and limited opportunities to spend on
services, the personal saving rate jumped to 16.8 percent in 2020 and remained at an elevated
11.8 percent in 2021. The personal savings rate has fallen over the course of 2022 and is expected
to be 3.6 percent in 2022 and 5.2 percent in 2023, as consumers spend down excess savings.
During the pandemic, consumers shifted their spending from personal services and activities like
entertainment, dining, and travel, to goods. This shift caused spending on durable and non-
durable goods to substantially exceed their pre-pandemic peaks, and both types of spending
remain at elevated levels. Spending on durable goods other than autos and medical devices grew
19.4 percent in 2021 and is expected to decelerate considerably to 1.5 percent in 2022 followed
by a decline of 0.1 percent in 2023. Consumer spending on other services, which includes face-to-
face services, such as such as food services, accommodations, and recreation, grew 14.8 percent
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in 2021 after a 19.7 percent decline in 2020. IHS expects consumer spending on other services to
surpass pre-pandemic levels in 2022 and grow 10.4 percent in 2022 and 6.1 percent in 2023.
Spending on durable goods other than autos and medical devices grew 19.4 percent in 2021 and is
expected to decelerate considerably to 1.5 percent in 2022 followed by a decline of 0.1 percent in
2023. Consumer spending on other services, which includes face-to-face services, such as such as
food services, accommodations, and recreation, grew 14.8 percent in 2021 after a 19.7 percent
decline in 2020. IHS expects consumer spending on other services to surpass pre-pandemic levels in
2022 and grow 10.4 percent in 2022 and 6.1 percent in 2023.
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Labor Market. During March and April 2020, the U.S. shed 22.0 million jobs. Since May 2020, the
U.S. has added jobs nearly every month. In August 2022, the U.S. surpassed the pre-pandemic
level of employment. In January through July 2022, the U.S. added an average of 457,000 jobs per
month. Employment growth has decelerated, adding an average of 289,000 jobs per month in the
past three months. IHS forecasts payroll employment to increase by 5.9 million in 2022, decline
by 534,000 over the course of 2023 and 2024, and rise by an average of 729,000 jobs per year in
years 2025-2027. With GDP declining in 2023, IHS expects the unemployment rate to rise to 5.7
percent by late 2024 before decelerating to 4.5 percent by 2026.
In August 2022, the U.S. surpassed the pre-pandemic level of employment. In January through July
2022, the US added an average of 457,000 jobs per month. Employment growth has decelerated,
adding 289,000 jobs per month in the past three months. With GDP declining in 2023, IHS expects
the unemployment rate to rise to 5.7 percent by late 2024 before decelerating to 4.5 percent by
2026.
21
The U.S. labor force participation rate, the proportion of potential workers who were employed or
unemployed and actively seeking employment, was 62.2 percent in October 2022. Despite rising
wages and job openings near all-time highs, the participation rate remains below the pre-pandemic
peak. An aging population is putting downward pressure on the labor force participation rate, a
trend expected to continue throughout the forecast horizon.
Despite rising wages and job openings near all-time highs, the U.S. labor force participation
rate, the proportion of potential workers who were employed or unemployed and actively
seeking employment, was 62.2 percent in October 2022. The labor force participation rate
remains below the pre-pandemic peak. An aging population is putting downward pressure on
the labor force participation rate, a trend expected to continue throughout the forecast
horizon.
The number of unemployed persons classified as “permanent job losers”—people who self-report
that they do not expect to return to work within six months—was 1.3 million in October, down
from 2.1 million in October of last year. The number of workers on temporary layoff—those who
do expect to return to work within six months—was 847,000.
Historically high levels of quits in 2021 and 2022 have created a very dynamic labor market.
Although the rate of quits has slowed throughout 2022, the quits rate has been historically high,
with 4.2 million people quitting per month on average. The quits rate for October 2022, which
measured the number of quits as a percent of total employment, was 2.6 percent. This measure
peaked at 3.0 percent in November and December 2021 and is slowly moderating toward the
2019, pre-pandemic average of 2.3 percent. High levels of quits indicate a labor market in which
individuals are comfortable leaving one job for higher wages elsewhere. As quits decline, inflation
is more likely to ease, because the rate of wage growth will likely decelerate.
22
Historically high levels of quits in 2021 and 2022 have created a very dynamic labor market.
Although the rate of quits has slowed throughout 2022, the quits rate has been historically high,
with 4.2 million people quitting per month on average.
As quits increased to historically high levels in the second half of 2021, unemployment insurance
(UI) claims continued to drop to more normal levels. Both U.S. initial claims for UI (claims filed by
individuals after a separation from an employer) and continued claims for UI (claims filed by
individuals after a week of continued unemployment) receded to pre-pandemic levels at the end
of 2021. Initial claims have remained close to 2019 levels throughout 2022, and continued claims
have remained at or below their 2019 levels. UI benefits comprised 5.5 percent of disposable
personal income in the second quarter of 2020, and they have comprised 0.1 percent of
disposable personal income in 2022. UI benefits averaged 0.2 percent of disposable personal
income from 2015 to 2019.
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Unemployment insurance (UI) claims subsided to more normal levels over the course of 2021. Both
initial claims for UI (claims filed by individuals after a separation from an employer) and continued
claims for UI (claims filed by individuals after a week of continued unemployment) receded to pre-
pandemic levels at the end of 2021. Initial claims have remained close to 2019 levels throughout
2022, and continued claims have remained at or below their 2019 levels.
Wage and Salary Income. Firm wage growth and household wealth continue to support consumer
spending in this forecast. Since federal stimulus payments to households have ended, and UI
benefits have decreased to more typical levels, IHS expects wage and salary income to be the
primary driver of personal income growth during the forecast period. IHS has decreased their
forecast for growth in total U.S. wage and salary disbursements compared to February. IHS
expects wage income growth of 8.8 percent in 2022, a 0.6 percentage point decrease from the
February forecast. The forecast for wage and salary income has also been revised down for years
2023 and 2024 to 4.0 and 4.1 percent respectively. IHS expects wage and salary growth to
rebound to 4.9 percent in 2025 and average 4.4 percent in both 2026 and 2027.
24
IHS expects wage income growth of 8.8 percent in 2022, a 0.6 percentage point decrease from the
February forecast. The forecast for wage and salary income has been revised down for years 2023
and 2024, to 4.0 and 4.1 percent respectively.
The Employment Cost Index (ECI) is a quarterly measure of the change in the cost of labor, free
from the influence of employment shifts among occupations and industries. The index is broken
into two components, one for wages and one for benefits. The index shown below is the ECI for
wages. The ECI reached 5.7 percent in the second quarter of 2022, a 40-year high. ECI fell to 5.3
percent in the third quarter of 2022. At the same time, the percent change in prices as measured
by the CPI reached 8.6 percent in the second quarter of 2022, also a 40-year high. CPI also dropped
modestly to 8.3 percent in the third quarter of 2022. The growth in prices as measured by the CPI
has exceeded the growth in wages as measured by the ECI for the past six quarters. This suggests
that by these two measures, while nominal wage growth has been strong, it has not outpaced
inflation. However, IHS expects this trend will reverse and wages will grow faster than inflation
beginning in the second quarter of 2023. IHS expects price growth will fall below three percent in
2024 and decelerate to 2.2 percent in years 2025-2027, below the wage growth expectation over
the same period.
25
The growth in prices as measured by the CPI has exceeded the growth in wages as measured by the
ECI for the past six quarters. This suggests that by these two measures, while nominal wage growth
has been strong, it has not outpaced inflation. However, IHS expects this trend will reverse and
wages will again grow faster than inflation beginning in the second quarter of 2023.
Real Business Fixed Investment. Real business fixed investment is expected to increase 3.2 percent
in 2022 and decline 1.5 percent in 2023 and 0.2 percent in 2024. In years 2025-2027, business fixed
investment growth is expected to average 1.6 percent growth per year. This is a dramatic departure
from the February forecast and reflects the impact of tightening financial conditions on business fixed
investment. Investment in petroleum and mining has been robust, reflecting recent increases in
petroleum prices However, spending in other areas has been weak.
26
In their November outlook, IHS expects business fixed investment to be much weaker than expected
in February because of tightening financial conditions. Real business fixed investment is expected
to increase 3.2 percent in 2022 and decline 1.5 percent in 2023 and 0.2 percent in 2024.
International Trade. The trade deficit closed substantially between March and August, from a
deficit of 107 billion dollars (an all-time high) to a deficit of 66 billion dollars. Lower imports
account for most of the reduction. In 2021, supply chain problems caused imports to lagged goods
demand. As supply chain issues eased, imports increased and became business inventory. Now,
the demand for imported goods is easing and imports are falling and will not recover until the
demand for goods recovers. In their November forecast, IHS expects export growth to outpace
import growth in 2023 as U.S. demand for foreign products decreases. IHS expects net exports to
be a drag on real GDP growth from 2024 through 2027, as U.S. demand for foreign goods once
again grows faster than foreign demand for U.S. goods.
27
After representing a substantial drag on U.S. real GDP growth in the first quarter of 2022, net
exports have boosted real GDP growth in the second and third quarters. IHS expects net exports to
contribute positively to growth in the fourth quarter and in 2023 as US demand for foreign goods
decreases. IHS expects net exports to again be a drag on the economy for years 2024 through 2027.
The nominal broad trade-weighted dollar index has strengthened considerably in 2022. This
strength is partially due to rapidly rising U.S. interest rates, and partially due to the Russian
invasion of Ukraine, which has increased the prices of U.S. exports (specifically oil and agricultural
commodities) relative to imports. The index is expected to appreciate through early 2023 before
gradually falling through 2027, supporting exports.
28
A significant rise in the dollar against U.S trading partners from 2014 to 2019 strengthened imports
and weakened exports. After weakening in 2020 and 2021, the dollar has strengthened
considerably in 2022. This strength is partially due to rapidly rising U.S. interest rates, and partially
due to the Russian invasion of Ukraine, which has increased the prices of U.S. exports relative to
imports. IHS expects the dollar to depreciate slightly from 2023 through 2027, supporting exports.
The IHS November baseline forecast for 2022 is similar to the November Blue Chip Consensus, the
median of 50 business and academic forecasts. The November Blue Chip Consensus calls for 1.8
percent growth in 2022, equal to IHS’ forecast for this year. IHS’ forecast for 2023 is lower than
the Blue Chip Consensus. IHS expects real GDP to decline 0.2 percent in 2022, 0.4 percentage
points lower than the Blue Chip Consensus of 0.2 percent growth next year.
Forecast risks. The IHS November outlook depends on several important forecast assumptions. If
these assumptions do not materialize, the economic outcome will differ from IHS’ baseline
forecast.
The current baseline forecast hinges critically on the Fed’s ability to curb inflation. IHS assumes
the Fed will raise the fed funds rate to 4.85 percent by mid-2023 before gradually decelerating to
below 3.0 percent in 2025. As a result, IHS expects inflation to slow to 4.3 percent in 2023 and 2.7
percent in 2024. If inflation persists above this level, the Fed may act more aggressively to raise
interest rates than assumed in the baseline forecast.
The Russian-Ukraine conflict poses risk to this forecast if it intensifies, leading to persistently
higher energy prices and re-emergence of supply-chain issues.
29
In this outlook, real GDP is forecast to grow at below-2.0-percent annual rates through 2027. This
slower growth makes the economy vulnerable to negative shocks, as there is less room for the
economy to recover from a setback than when growth is faster.
Other key assumptions of IHS' November outlook are: (1) the tariffs enacted by the U.S. and China
since 2017 remain in effect, (2) global GDP growth slows from 3.1 percent in 2022 to 1.2 percent
in 2023, and (3) the Brent crude oil price will continue to decelerate from a peak of $113/barrel
in the second quarter of 2022 to $96/barrel in the fourth quarter of this year and subsiding to
$90/barrel by the fourth quarter of 2023.
IHS assigns a 55 percent probability to the November baseline outlook. They assign a 30 percent
probability to a more pessimistic scenario, characterized by (1) an intensification and continuation
of the Russia-Ukraine conflict that generates persistently higher energy and commodity prices,
wider risk spreads, and slower global growth, and (2) a slower resolution of existing supply-chain
issues. In this scenario, GDP grows 1.7 percent in 2022 and contracts 1.1 percent in 2023,
compared to 1.8 percent and -0.2 percent in the baseline scenario. In their more optimistic
scenario, IHS assumes a stronger consumer and business response to the Infrastructure
Investment and Jobs act (IIJA) and a quicker resolution to the Russia-Ukraine conflict. In this
scenario, GDP grows 1.9 percent in 2022 and 0.7 percent in 2023. The optimistic scenario receives
a 15 percent probability.
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Minnesota Economic Outlook

With the U.S. economic outlook now incorporating a three-quarter recession, the economic
outlook for Minnesota has weakened since MMB’s Budget and Economic Forecast was prepared
in February 2022. Nevertheless, Minnesota’s labor market remains one of the tightest in the
nation, with the lowest unemployment rate and the fifth highest labor force participation rate in
the U.S. As of October, Minnesota employers have added jobs for 13 consecutive months, growing
employment 3.6 percent over the last 12 months.
In this forecast, a weakened U.S. outlook for consumer spending, wage and salary growth, total
employment, and personal income drives our expectation that Minnesota’s employment and
wage growth will decelerate in 2023 and 2024. An aging labor force constrains Minnesota’s
employment growth through the forecast horizon. Minnesota’s economic outlook is informed by
the IHS forecasts for both the U.S. and for Minnesota, data from the Minnesota Department of
Economic and Employment Development (DEED), Quarterly Census of Employment and Wages
(QCEW), Minnesota tax revenues, and our own forecast modelling.
Minnesota has the lowest unemployment rate in the U.S. The seasonally adjusted unemployment
rate in MN was 2.1 percent in October 2022, a full 1.6 percentage points below the U.S. The
unemployment rate does not capture Minnesotans that have left the labor force, including
retirements or those who opted to stay home to care for children. Since the onset of the pandemic,
Minnesota’s labor force has fallen by 92,000.
Labor Market. Minnesota has one of the tightest labor markets in the country, with the lowest
unemployment rate among U.S. states (2.1 percent), the fifth highest labor force participation
rate (68.0 percent) and more than two open positions for each unemployed individual in
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Minnesota. The state’s employers have created an average of 9,000 jobs per month in 2022.
October posted the strongest month of 2022 to date, with an addition of 17,400 jobs.
Minnesota lost 417,600 jobs in March and April 2020, approximately 14 percent of February 2020
payroll employment. Through October 2022, Minnesota has regained 376,600 of those jobs, or
90 percent of the payroll jobs lost during the pandemic recession, leaving employment 41,000
(1.4 percent) less than in February 2020. U.S. employment surpassed the February 2020 level in
August 2022.
Minnesota’s seasonally adjusted October unemployment rate of 2.1 percent is the lowest among
U.S. states and 1.6 percentage points below the U.S. unemployment rate of 3.7 percent. The
unemployment rate does not capture Minnesotans that have left the labor force, including
retirements or those who opted to stay home to care for children.
Since the onset of the pandemic in February 2020, Minnesota’s labor force has fallen by 92,000.
This decline in the labor force can also be seen in the labor force participation rate, the share of
the over-16 population that is either working or looking for work. As of October, Minnesota’s
labor force participation rate was 68.0 percent, 0.7 percentage points higher than a year ago and
2.8 percentage points lower than in February 2020. Nevertheless, Minnesota’s labor force
participation rate remains 5.8 percentage points above the U.S. rate of 62.2 percent and is the
fifth highest among U.S. states. This means there is little slack in Minnesota’s labor market
compared to other parts of the country.
Source: Minnesota Department of Employment and Economic Development (DEED), Minnesota Management & Budget (MMB)
Minnesota’s labor force participation rate remains 5.8 percentage points above the U.S. rate and
the fifth highest among U.S. states. This means there is little slack in Minnesota’s labor market
compared to other parts of the country. Additionally, the forecast for growth in Minnesota’s labor
force is constrained by an aging population.
(89,000 jobs) this year and slow to 0.3 percent (9,800 jobs) in 2023 and 0.0 percent (1,400 jobs)
in 2024. From 2025 to 2027 we expect employment growth to average 0.5 percent, or 14,300 jobs
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per year. Minnesota’s employment growth is constrained throughout the forecast horizon by
lower levels of immigration into Minnesota and an aging labor force moving into retirement. The
MMB model of the Minnesota economy incorporates preliminary information on forthcoming
revisions to Minnesota’s non-farm payroll employment, as well as personal income wages
informed by new data from the Quarterly Census of Employment and Wages (QCEW) and income
tax withholding collections since November.
(89,000 jobs) this year and slow to 0.3 percent (9,800 jobs) in 2023 and 0.0 percent (1,400 jobs) in
2024. From 2025 to 2027 we expect employment growth to average 0.5 percent. Minnesota’s
employment growth is constrained throughout the forecast horizon by lower levels of immigration
into Minnesota and an aging labor force moving into retirement.
Broader measures of unemployment can provide additional insights into characteristics of

Minnesota’s labor market. The most comprehensive measure of unemployment, which the BLS
calls U-6, is defined as the number of unemployed people (U-3), plus workers who are marginally
attached to the labor force (those not currently in the labor force who looked for work in the last
year), plus part-time workers who would prefer full-time jobs. In October, Minnesota’s U-6 rate
was 4.9 percent, down from 6.8 percent one year ago. All estimates of alternative measures of
unemployment are provided in 12-month moving averages to increase the sample size for each
measure, and as a result, improve the reliability of each statistic.
About three quarters of the difference between the state’s U-3 and U-6 rates is due to workers
who have part-time jobs but would prefer to work full time. In October, 26,100 workers fell into
this category, 11,100 fewer than in October 2022. In October, 4,900 Minnesotans were counted
as discouraged workers--those marginally attached workers who believe no jobs are available to
them--up from 4,500 a year ago.
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In October, 11,500 Minnesotans were reported as long-term unemployed, those unemployed

more than 27 weeks. This number was down from 41,400 one year ago and is comparable to
February 2020, when there were 11,100 long-term unemployed.
The 2020 Census data revealed that Minnesota grew by 7.6 percent (402,569 people) in the last
decade, slightly higher than the national growth during this period of 7.4 percent and more than
twice the Midwest regional average of 3.1 percent. Population growth was slower both nationally
and in Minnesota because of an aging population. However, population growth in Minnesota
slowed in 2020. During the 2010s, Minnesota’s population grew by 0.8 percent annually (about
40,300 people per year). In comparison, the state’s population grew by less than .001 percent, an
estimated 225 people, between 2020 and 2021. This slowing can be attributed to decreased net
international migration, lower birth rates, and an increase in mortality as a result of the COVID-
19 pandemic. Information on the components of population change, such as domestic migration
and international immigration will be released in late December.
Wage and Salary Income. A crucial variable influencing Minnesota’s individual income tax liability
is total wage and salary income, estimated to account for 69 percent of federal adjusted gross
income for Minnesota residents in 2022. As employers work harder to fill open positions, and
businesses invest in productivity-enhancing technologies, wage and salary income per worker—
or average wage income—is expected to continue to rise.
In February, we expected total wage income, the sum of all wages distributed, to increase 8.4
percent in 2021. We now know that wage and salary income in Minnesota grew 7.2 percent in
2021. We expect strong wage growth to continue at a rate of 6.9 percent in 2022 before
decelerating to 4.5 percent in 2023 and an average of 5.0 percent for years 2024-2027.
We expect total wage income, the sum of all wages distributed, to increase 6.9 percent in 2022
before decelerating to 4.5 percent in 2023 and an average of 5.0 percent for years 2024-2027.
34
Combining our wage income forecast with our lower employment growth forecast, we expect growth
in the average wage income per worker to increase through 2025. Average wage income is expected
to be 3.6 percent in 2022 and accelerate to 4.1 percent in 2023. Our forecast expects wage income
per worker of around 4.6 percent per year in years 2024-2027. This exceeds forecasted average rates
of inflation over the same period (2.5 percent), implying improvements in real wages. With only
moderate growth in Minnesota employment in this forecast, growth in average wages (wage and
salary income per worker) is going to be the primary driver of growth in total nominal wage income
through our forecast horizon.
We expect Minnesota total wage growth of 6.9 and 4.5 percent for Minnesota in 2022 and 2023.
Combined with our employment growth forecast, these rates result in growth of wage income per
worker of around 4.6 percent per year in years 2024-2027. This exceeds forecasted rates of inflation
over the same period, implying improvements in real wages.
35
Forecast Comparison: Minnesota & U.S.

Forecast 2022 to 2027, Calendar Years
2020 2021 2022 2023 2024 2025 2026 2027

Personal Income (Billions of Current Dollars)
Minnesota
November 2022 355.2 378.8 385.6 405.1 425.5 447.5 469.1 490.9
%Chg 6.7 6.6 1.8 5.1 5.0 5.2 4.8 4.7
February 2022 350.8 375.1 379.6 397.2 415.9 435.3
%Chg 6.5 6.9 1.2 4.6 4.7 4.7
U.S.
November 2022 19,832 21,295 21,787 22,800 23,799 24,875 25,983 27,178
%Chg 6.7 7.4 2.3 4.6 4.4 4.5 4.5 4.6
February 2022 19,628 21,060 21,495 22,603 23,756 24,973
%Chg 6.5 7.3 2.1 5.2 5.1 5.1
Wage and Salary Disbursements (Billions of Current Dollars)
Minnesota
November 2022 179.4 192.2 205.5 214.6 225.2 237.8 249.6 260.8
%Chg 0.1 7.2 6.9 4.5 4.9 5.6 5.0 4.5
February 2022 179.1 194.1 210.1 221.0 231.3 241.5
%Chg 0.0 8.4 8.2 5.2 4.6 4.4
U.S.
November 2022 9,457 10,290 11,199 11,650 12,131 12,721 13,286 13,865
%Chg 1.4 8.8 8.8 4.0 4.1 4.9 4.4 4.4
February 2022 9,444 10,306 11,276 11,928 12,511 13,111
%Chg 1.3 9.1 9.4 5.8 4.9 4.8
Total Non-Farm Payroll Employment (Thousands)
Minnesota
November 2022 2,784 2,849 2,938 2,948 2,949 2,971 2,983 2,992
%Chg -6.7 2.3 3.1 0.3 0.0 0.7 0.4 0.3
February 2022 2,791 2,846 2,942 2,987 3,015 3,036
%Chg -6.6 2.0 3.4 1.5 0.9 0.7
U.S.
November 2022 142,146 146,102 152,021 152,012 151,487 152,525 153,226 153,864
%Chg -5.8 2.8 4.1 0.0 -0.3 0.7 0.5 0.4
February 2022 142,146 146,096 151,541 153,894 155,108 156,017
%Chg -5.8 2.8 3.7 1.6 0.8 0.6
Average Annual Non-Farm Wage (Current Dollars)
Minnesota
November 2022 64,416 67,464 69,923 72,808 76,341 80,031 83,676 87,165
%Chg 7.3 4.7 3.6 4.1 4.9 4.8 4.6 4.2
February 2022 64,189 68,226 71,387 73,990 76,703 79,546
%Chg 7.1 6.3 4.6 3.6 3.7 3.7
U.S.
November 2022 66,533 70,431 73,670 76,637 80,080 83,401 86,711 90,112
%Chg 7.7 5.9 4.6 4.0 4.5 4.1 4.0 3.9
February 2022 66,440 70,546 74,409 77,506 80,659 84,034
%Chg 7.5 6.2 5.5 4.2 4.1 4.2
Source: IHS Economics and Minnesota Management and Budget (MMB)
36
Job Vacancies. Data from the most recent data from DEED’s job vacancy report further illustrates
the tight labor market in Minnesota. Employers continue to struggle vacant positions. The most
recent Job Vacancy Survey covers the fourth quarter of 2021 and reports that there are now
214,071 job vacancies in the state, an increase of 68 percent from the same period a year ago and
a record high. In the fourth quarter of 2021 there were about 0.4 unemployed persons for each
vacancy statewide, or 4 people for each ten job openings.
The most recent data from DEED’s job vacancy survey reports there are now 214,071 job vacancies
in the state. Employers are struggling to fill vacant positions, with only 4 unemployed people
available for every 10 job vacancies.
Statewide, the Health Care & Social Assistance industry had the most job vacancies with more
than 52,000 openings. Health Care & Social Assistance is followed by Retail Trade with just under
40,000 vacancies, Accommodation & Food Services with more than 31,500 postings, and
Manufacturing with 16,500 vacancies. Combined, those four industries account for two-thirds of
the total openings in the state.
Homebuilding Activity. The U.S. real estate market is cooling as higher mortgage interest rates
and rising consumer prices put pressure on homebuyer budgets. As a result of tightening
monetary policy, home mortgage interest rates surpassed 7 percent for the first time in two
decades in late October and early November. In Minnesota, home prices continue to rise, and
inventory remains limited. In October, new listings in Minnesota decreased 19.1 percent and
pending sales were down 33.5 percent over one year ago.
The median sales prices for both metro-area homes and homes in greater Minnesota have
continued to increase despite rising interest rates, declines in new listings, and declines in pending
sales. In October, the median price for metro-area homes was $359,900, 5.5 percent higher than
the median price of $341,000 in October of last year. Homes in the metro area were being sold
after an average of more than 36 days on the market compared to an average of 27 days one year
37
ago. On average, metro-area sellers received 98.3 percent of the original list price at closing. The
median sales price in Minnesota was $320,000 in October, up 3.8 percent from a year ago.
The combination of higher interest rates and rising home prices is challenging affordability. The
housing affordability index--the ratio of median household income to the income needed to
purchase a home--has dropped to 98 percent, down from 144 one year ago. A lower affordability
index means homes are less affordable. In this forecast, IHS expects the 30-Year fixed mortgage
rate to peak at 7.0 percent in the first quarter of 2023, followed by a deceleration to less than 5.0
percent in 2027.
The U.S. real estate market is cooling as higher mortgage interest rates and rising consumer prices
put pressure on homebuyer budgets. The Federal Reserve implemented another 75-basis point hike
in November, the fourth consecutive increase of this magnitude in 2022. As a result, home
mortgage interest rates have surpassed 7 percent for the first time in two decades. In October, new
listings in Minnesota decreased 19.1 percent and pending sales were down 33.5 percent over one
year ago.
Throughout the U.S., rents have been rising rapidly. In Minnesota, however, and particularly in
the Minneapolis metro area, rents have shown stability. According to data from MN HousingLink,
rents in the metro area rose steadily for most of the past decade but have stabilized since 2019.
Although rents are not rising, Minnesota has a persistent affordable rent problem. In Minneapolis,
less than 40 percent of vacancies were affordable to families’ making no more than 50 percent of
the area median income in October 2022 2.
According to data through September from the U.S. Census Bureau, the total year-to-date number
of authorized residential building permits (not seasonally adjusted) in Minnesota is lagging last
2
Minnesota HousingLink. “Minnesota Rental Housing Brief,” October 2022, page 4. Available here:
HousingLink - Minneapolis Rental Housing Briefs.
38
year by 6.5 percent. The decline is due to a 20.5 percent decline in single-family housing permits
and is offset by an 8.0 percent increase in multi-family permits in Minnesota. Last year Minnesota
saw the highest number of housing permits since 2005, with over 37,000 permits. In this forecast,
we expect total housing permits to fall just shy of 31,000 in 2022 before a dramatic deceleration
to 22,100 in 2023. We expect total housing permits to average 25,000 permits per year in years
2024-2027. Single-family permits are a critical housing data source because they are well-
measured and are a dependable indicator of where single-family construction is heading.
Nationally, single-family housing permits fell for the seventh straight month through September.
Last year Minnesota saw the highest number of housing permits since 2005, with over 37,000
permits. In this forecast, we expect total housing permits to fall just shy of 31,000 in 2022 before a
dramatic deceleration to 22,100 in 2023.
Exports. Minnesota’s exports of goods and services to countries throughout the world is a
significant source of income and jobs in the state. DEED reports that exports supported more than
112,000 jobs in 2020. In 2021, both Minnesota and the U.S. rebounded from weak pandemic-
related global conditions impacting imports in 2020.According to DEED, Minnesota’s worldwide
exports totaled $24 billion in 2021, up 17 percent over 2020, while the U.S. increased 23 percent
over 2020. Global demand for machinery, mineral fuel, oil, and electrical equipment supported
Minnesota’s recovery in exports in 2021 and helped these industries surpass their 2019 levels.
Ranked by export value, Minnesota ranked 22nd among states. The state’s largest markets are
Canada ($6.6 billion), China ($2.7 billion), and Mexico ($2.5 billion).
39
In 2021, both Minnesota and the U.S. rebounded from weak pandemic-related global conditions
impacting imports in 2020.According to DEED, Minnesota’s worldwide exports totaled $24 billion
in 2021, up 17 percent over 2020, while the U.S. increased 23 percent over 2020.
In the third quarter of 2022, Minnesota’s exports of goods reached a record high for state
quarterly exports, growing 28 percent from a year ago to $7.3 billion. Minnesota’s manufactured
exports grew to $6.4 billion, growing 21 percent year-over-year in the third quarter of 2022. Year-
to date, Minnesota exports are up 18 percent and U.S. exports are up 21 percent. The U.S.
Economic Outlook section contains information regarding the impact of a stronger dollar on net
exports.
Agriculture. According to the U.S. Department of Agriculture’s farm income forecast, overall U.S.
net farm income, a broad measure of profits, is estimated to have increased $7.3 billion (5.2
percent) to $147.7 billion in 2022. This increase follows an increase of $45.9 billion (48.5 percent)
in 2021. Higher prices are increasing crop cash receipts, which are forecast to increase 15.3
percent in 2022 in nominal terms. If realized, this would be the highest level since 2012.
Accounting for most of the net increase are increased receipts for corn, soybeans, and wheat.
According to the latest USDA Agricultural Prices Report, the average price for corn during October
2022 was $6.50 per bushel, $1.48 above October 2021. Similarly, the average price for soybeans
was $13.50 per bushel, $1.60 above the October 2021 price. Finally, total animal and animal
product receipts are expected to increase 28.3 percent in nominal terms in 2022, which offsets a
decline in quantity sold.
Investments in agricultural machinery in the second half of 2020 approached all-time highs as
operations responded to high commodity prices and increased farm income. This heightened level
of investment has continued through the third quarter of 2022. Since the third quarter of 2020,
investment in agricultural machinery has reached levels not seen since 2014.
40
IHS expects the price of U.S. agricultural output, currently more than double the low reached
during the pandemic, to remain elevated through 2022 due to disruption to agricultural exports
from Russia and Ukraine. IHS then expects prices to ease in 2023 as global yields increase.
According to the latest USDA Agricultural Prices Report, the average price for corn during October
2022 was $6.50 per bushel, $1.48 above October 2021. Similarly, the average price for soybeans
was $13.50 per bushel, $1.60 above the October 2021 price. Investments in agricultural
machinery in the second half of 2020 approached all-time highs as operations responded to high
commodity prices and increased farm income. This heightened level of investment has continued
through the third quarter of 2022.
41
Council of Economic Advisors’ Statement

Minnesota’s Council of Economic Advisors met on November 14, 2022, to review the IHS Markit
(IHS) outlook for U.S. economic growth, which includes the macroeconomic assumptions
underlying Minnesota’s November 2022 Budget and Economic Forecast. Since IHS prepared their
February 2022 forecast, the global and U.S. economies have seen dramatic changes. These include
the Russian invasion of Ukraine, spiking inflation, six Federal Reserve actions to raise interest
rates, and a commitment by the Fed to fight inflation even at the risk of a downturn.
Consequently, IHS’s outlook for U.S. economic growth in 2022 has significantly weakened. They
now expect real GDP to grow 1.8 percent in 2022, less than half of the 3.7 percent growth in their
February outlook. They expect this to be followed by a mild recession in 2023, with real GDP
contracting 0.2 percent and the unemployment rate rising to 5.7 percent. This is a remarkable
change from their February forecast, which assumed 2.7 percent growth in 2023 and
unemployment averaging 3.5 percent.
During much of this year, IHS forecast a growth recession for 2023, characterized by below-
potential—but still positive—real GDP growth and upward pressure on unemployment. But by
October, tightened financial market conditions led IHS to weaken their forecast to include three
consecutive quarters of real GDP contraction beginning in the fourth quarter of this year. They
expect the recession to be driven by weakness in real investment spending, particularly residential
investment. The recession is forecast to be mild by historical standards, with a recovery to begin
in the third quarter of 2023.
In the November outlook, tightening financial conditions weaken investment, particularly in home-
building. IHS now expects a historically mild 0.7 percent peak-to-trough decline in real GDP,
compared to the average, pre-2008 recessionary decline of 1.7 percent.
42
Since the state’s last forecast in February, IHS’s outlook for U.S. economic growth has weakened
for all years in our planning period. They now expect real GDP to grow 1.8 percent in 2022, less
than half of the 3.7 percent growth in their February outlook. They expect this to be followed by a
mild recession in 2023, with real GDP contracting 0.2 percent and the unemployment rate rising to
5.7 percent.
Following the expected contraction in 2023, IHS expects modest growth to continue through
2027, albeit at lower annual rates than they forecast in February. They now expect real GDP to
grow on average 1.7 percent annually in 2024-2027, below the 2.5 percent average annual rate
in their February outlook.
IHS has raised their forecast of CPI inflation this year to 8.1 percent from 4.5 percent in their
February outlook. With the slower growth in their baseline outlook, they now expect inflation to
decelerate to 4.3 percent in 2023. This is more than twice the 1.9 percent rate they expected in
February. IHS forecasts CPI inflation to moderate to 2.7 percent in 2024 and 2.3 percent in 2025.
For 2022, the IHS November baseline forecast matches the Blue Chip Consensus, the median of
50 business and academic forecasts. Both the Blue Chip consensus and IHS expect real GDP
growth of 1.8 percent in 2022. IHS expects real GDP to contract 0.2 percent in 2023, below the
Blue Chip Consensus forecast of 0.2 percent growth for that year.
Council members warn that the economy faces enormous uncertainty, as the Russia-Ukraine
conflict continues, global growth is precarious, and the Fed is navigating a narrow path to control
inflation. Under these conditions, Council members agree that IHS’ baseline outlook is a
reasonable starting point for Minnesota’s economic and budget forecast, but they caution about
significant risks to the forecast. The views of individual Council members varied, but there was
general agreement that the risks were balanced between the upside and downside.
Regarding upside risks, a resolution to the Russia-Ukraine conflict could lower natural gas and
commodity prices and ease some remaining supply chain issues. This could allow global growth—
and consequently U.S. growth—to exceed the rates in IHS’ baseline forecast. In addition, growth
in the Consumer Price Index for October was lower than IHS expected in their November baseline.
43
If inflation continues to moderate, the Fed may be able to achieve their inflation objective without
large job losses, and the mild recession in IHS’ forecast could be avoided.
Inflation poses the most prominent, near-term, downside risk. Council members warn that
stubbornly persistent inflation could lead the Fed to act more aggressively to raise interest rates
than IHS assumes in their baseline outlook. This could induce a contraction in 2023 that is deeper
and/or longer than IHS has forecast. Moreover, monetary policy works with long and difficult-to-
predict lags. Even if inflation and Fed actions follow the IHS forecast, that path could result in
more job losses and lower GDP growth than IHS expects.
Council members warn that the difficulty of projecting long-range economic conditions warrants
caution when using forecasts for 2025 through 2027. This is of particular concern as the structural
effects of the pandemic on the economy are still not fully known. In addition, the IHS baseline
forecast calls for modest real GDP growth of less than 2.0 percent from 2024-2027. This slow
growth leaves the economy vulnerable to negative shocks, such as geo-political conflicts, natural
disasters, and financial market volatility, which could cause growth in the planning estimate years
to underperform IHS’ expectations.
probability to a more pessimistic scenario, characterized by (1) an intensification and continuation
of the Russia-Ukraine conflict that generates persistently higher energy and commodity prices,
wider risk spreads, and slower global growth, and (2) a slower resolution of existing supply-chain
issues. In this scenario, GDP grows 1.7 percent in 2022 and contracts 1.1 percent in 2023,
compared to 1.8 percent and -0.2 percent in the baseline scenario. In their more optimistic
scenario, IHS assumes a stronger consumer and business response to the Infrastructure
Investment and Jobs act (IIJA) and a quicker resolution to the Russia-Ukraine conflict. In this
scenario, GDP grows 1.9 percent in 2022 and 0.7 percent in 2023. The optimistic scenario receives
a 15 percent probability.
44
probability to a more pessimistic scenario in which a longer and more intense Russia-Ukraine
conflict generates persistently higher prices and slower global growth. They assign a 15 percent
probability to a more optimistic scenario, characterized by a stronger impact of the Infrastructure
Investment and Jobs Act and a quicker resolution to the Russia-Ukraine conflict.
As it has done every year since 2003, the Council recommends that budget planning estimates for
the next biennium include expected inflation in both spending and revenue projections. Council
members noted that Minnesota’s current practice of excluding projected changes in the prices of
goods and services from a majority of the spending estimate is fundamentally misleading. It is
inconsistent with both sound business practices and CBO methods, and potentially encourages
legislators and the public to regard the state’s financial position more optimistically than the facts
warrant. This distortion has increased in importance as inflation has risen this year, and its future
path is uncertain. The omission of inflation in the spending estimates in the November 2022
Budget and Economic Forecast understates the cost of maintaining current service levels as
provided by law in FY 2024-25 by roughly $1.552 billion and in FY 2026-27 by $3.309 billion. In
addition, inflation that has already occurred in CY 2022 and is forecast for the first half of CY 2023
puts cost pressure on the enacted budget for FY 2022-23.
Council members believe that Minnesota’s budget reserve—which is $2.656 billion, $43 million
below the level recommended by the state’s budget reserve policy—affords policymakers crucial
financial flexibility. The statutory policy assigns an adequate target reserve level based on MMB’s
annual evaluation of volatility in Minnesota’s general fund tax system. The target is a percentage
of forecast revenues, allowing reserves to adjust with revenue changes over time. In addition, the
policy automatically transfers 33 percent of a positive forecast balance each November into the
reserves until the target is reached. Based on MMB’s most recent analysis, the target level is 4.8
percent of biennial (two-year) general fund revenues.
45
BUDGET OUTLOOK
Current Biennium
When the last Budget and Economic Forecast was released in February 2022, a surplus of $9.253
billion was projected for the current biennium. Legislative action appropriating supplemental
spending and adjusting general fund resources in the 2022 session reduced the projected balance
to $7.049 billion. Since then, actual collections have exceeded forecast and estimated spending
has been reduced. With this release, the current biennium is now expected to conclude with a
budgetary surplus of $11.605 billion.

November 2022 $ %
Beginning Balance $7,026 $7,026 $ - 0.0%
Taxes 54,594 57,303 2,709 5.0
Non-Tax Revenues 1,626 2,116 490 30.1
Transfers, Other Resources 435 509 75 17.2
Total Revenues $56,655 $59,928 $3,273 5.8%
E-12 Education 20,503 20,223 (280) (1.4)
Debt Service 1,183 1,140 (43) (3.6)
All Other 10,622 10,533 (89) (0.8)
FY 2022 Close. In August, the books were officially closed for the fiscal year that ended June 30,
2022. Fiscal Year 2022 ended with a general fund balance of $8.744 billion, $3.279 billion above
prior estimates. This gain, representing “money in the bank,” is included in the projected
increased forecast balance for the current biennium.
46
Current Biennium: FY 2022 General Fund Close

FY 2022 $
($ in millions) End of Session Close Change
Appropriation Carryfwd - 973 973
Total revenues, transfers-in and other resources in FY 2022 were $2.979 billion higher than
previously forecast. Tax revenue was $2.836 billion more than projections and non-tax revenues
were $76 million above previous projections. Prior period adjustments were $61 million higher
than estimated. Prior year adjustments reflect savings occurring from cancellations of
encumbrances (contracts, grants, or purchase orders), revenues deposited during the year but
attributable to prior fiscal years, or other financial activity related to loans and cash advances.
These are reflected as adjustments in the most recent fiscal year – in this case, FY 2022.
FY 2022 spending was $1.307 billion below prior estimates. Of that amount, $973 million is due
to unspent appropriations that have spending authority that carries into FY 2023 and is reflected
as increased spending in that year. The most significant appropriation carrying forward was $500
million for Frontline Worker Payments; these payments have subsequently been made in FY 2023.
E-12 education spending was $110 million lower due to lower projected pupil counts, while HHS
spending was $101 million below prior estimates. Actual cancellations of direct appropriated
funding totaled $36 million. The budget reserve ended with a balance of $2.672 billion, $17 million
higher than expected to a statutory allocation from surplus assigned risk insurance plan balances.
The cash flow account balance was unchanged at $350 million. The stadium reserve account
closed the fiscal year with a balance of $229 million, $17 million higher than previous estimates.
FY 2023. Higher projected investment income and lower than projected spending on HHS
programs and E-12 education are largely responsible for the additional gain to the projected
ending balance for the current biennium. Since February, actual and projected interest rates on
invested general fund cash have significantly increased. These higher rates combined with
significant cash balances in the general fund result in projected investment earnings of $428
million, $398 million higher (1,427 percent) than prior estimates for the fiscal year.
Combining the spending savings from FY 2022 close with reduced estimates for spending in FY
2023 results in $1.520 billion (2.9 percent) lower spending projected for the current biennium
compared to prior estimates. Lower HHS spending accounts for the majority of change in the
spending estimates. Higher federal participation in Medical Assistance (MA) combined with lower
managed care rates drives the downward forecast adjustment in HHS. E-12 education spending,
property tax aids and credits, and debt service were also projected to be lower than prior
estimates.
47

November 2022 $
Forecast Balance $7,049 $11,605 $4,556
Budget Reserve. Minnesota Statutes 16A.152 directs MMB to allocate funds to the budget
reserve account up to the recommended budget reserve level when there is a projected surplus
in the current biennium in the November Budget and Economic Forecast. In September, MMB, in
accordance with Minnesota Statutes section 16A.152 subd.8, recommends a budget reserve
target of 4.8 percent. When calculated using the updated revenue forecast with this release, the
budget reserve target level is $2.852 billion. Given the reserve balance at the end of FY 2022 was
below the new target level, funds from the projected surplus are allocated so that the reserve
balance is now at the target level of $2.852 billion. The cash flow account balance is unchanged
at $350 million.
Over the last 10 years the reserve balance has significantly largely increased due to a law change
that sets a reserve target based on the volatility of the state’s revenue sources and allows for
automatic allocation to the reserve when there is a projected balance at the time to the November
Budget and Economic Forecast. The reserve balance as of this release is $2.852 billion after an
allocation of $196 million in FY 2023.
48
Stadium Reserve. The stadium reserve is a residual account within the general fund. Its balance
can grow when certain general fund revenues identified in statute, like a portion of lawful
gambling receipts, exceed general fund appropriations that are either directly for the stadium,
like debt service on the bonds for its construction, or are identified in statute to be factored into
the stadium reserve calculation.
The stadium general reserve account was expected to grow year over year when end of session
estimates were released. With revenues for stadium uses increasing at a faster rate in the
November 2022 forecast versus previous end of session estimates, the reserve is now projected to
grow to $1.031 billion by the end of FY 2027.
The FY 2023 projected balance of the stadium reserve account is $368 million, $41 million higher
than end-of-session estimates. Most of the expenditures identified in law for the stadium reserve
formula are a fixed amount in law or show minimal variance from year to year. Lawful gambling
revenue and Minneapolis sales tax receipts are the two revenues identified for the stadium
reserve formula that are forecast and can grow year over year. In FY 2022, lawful gambling
revenue available for stadium uses was $145 million. Annual lawful gambling revenue available
for stadium uses is expected to grow to $199 million by the end of FY 2027. Additionally, the state
annually retains Minneapolis sales tax receipts to cover the payments the state remits on behalf
of the city for stadium obligations. As specified in statute, the state was required to negotiate the
terms of this repayment with the city, which were finalized in fall 2020. In FY 2023, it is projected
the state will retain $22 million in Minneapolis sales tax receipts. By FY 2027 that amount is
expected to grow to $23 million.
Total state expenditures for the stadium, including those the state makes on behalf of the City of
Minneapolis, were $43 million in FY 2022 and are expected to be $45 million per year through FY
2027. All revenue in excess of spending amounts is allocated to the stadium reserve. In FY 2023,
$139 million is expected to be added to the stadium reserve. By FY 2027 the amount allocated to
the reserve is expected to be $177 million. Given the increasing allocation amounts, the stadium
reserve balance is expected to reach $1.031 billion by FY 2027.
49
Next Biennium
At the end of the 2022 legislative session, the general fund balance for the next biennium was
projected to reach $12.112 billion. The larger projected surplus for the current biennium, along
with reduced base spending estimates and a small forecast revenue increase result in a projected
balance of $17.616 billion. The majority of the projected balance in the FY 2024-25 biennium is
due to the $11.605 billion unallocated surplus left-over from FY 2022-23. Of the projected
balance, only $6.011 billion is generated by revenues forecast for the biennium less base spending
estimates.
The projected FY 2024-25 balance is not considered a surplus because it is estimated using
projected revenues and base spending estimates before appropriations for the FY 2024-25 budget
are enacted by the 2023 legislature. The projected balance is a starting point for the Governor’s
budget recommendations and the legislature’s budget setting process.

November 2022 $
Beginning Balance $10,382 $15,175 $4,794
Forecast Revenues 59,871 60,281 410
Projected Spending 54,553 53,953 (600)
Balance Before Reserve $15,699 $21,503 $5,804
Biennial Budgetary Growth. When compared to revised forecast estimates for the current
biennium, general fund revenue in FY 2024-25 is projected to increase $353 million (0.9 percent)
while spending is expected to grow $2.175 billion (4.2 percent) compared to the current
biennium.
Revenue projections are based on current law and forecast economic growth, while spending
estimates for the next biennium assume that current funding levels and policies continue
unchanged, adjusted only for caseload and enrollment changes as well as specific formula-driven
items. The expenditure forecast does not assume inflationary cost growth outside of a limited
number of specific budget areas including a portion of health care spending, debt service, special
education and property tax refunds.
Revenue. Revenue in the FY 2024-25 budget period is expected to grow to $60.281 billion, an
increase of $353 million (0.6 percent) compared to the current biennium. Tax collections are
expected to be $515 million higher, with growth in income and sales tax partially offset by reduced
collections in corporate income tax and other smaller tax types. Non-tax revenue is expected to
exceed the current biennium by $151 million (7.1 percent) driven by an increased investment
50
income forecast due to higher expected interest rates and large expected general fund cash
balances. Partially offsetting total revenue growth are $313 million lower (61.4 percent) expected
transfers from other funds and other resources, largely due to the phase out of a statutory
transfer from the health care access fund to the general fund.

$ %
Beginning Balance $7,026 $7,026 $ - 0.0%
Taxes 57,303 57,818 515 0.9
Non-Tax Revenues 2,116 2,266 151 7.1
Transfers, Other Resources 509 197 (313) (61.4)
Total Revenues $59,928 $60,281 $353 0.6%
E-12 Education 20,223 21,252 1,029 5.1
Debt Service 1,140 1,147 7 0.6
All Other 10,533 9,271 (1,262) (12.0)
Budget Reserve 2,852 2,852 -
Spending. Base level expenditures in the next biennium are expected reach $53.953 billion, an
increase of $2.175 billion (4.2 percent) compared to the current budget. The two largest
expenditures, E-12 education and health and human services (HHS), drive the biennial growth. In
HHS, growth in medical assistance spending (MA) drives the majority of the $2.578 billion (16.9
percent) change. E-12 spending is expected to grow $1.029 billion (5.1 percent) due to higher
compensatory aid and special education spending. Spending for property tax aids and credits is
expected to be $176 million (3.8 percent) lower than the current biennium due to $500 million in
one-time payments to frontline workers in FY 2023. Offsetting the overall growth is $1.262 billion
(12.0 percent) lower spending in the other areas of state government, due in large part to one-
time spending in FY 2022-23.
Budget Reserve. The expected budget reserve account balance of $2.852 billion in the next
biennium is unchanged from the current biennium. This balance is $196 million higher than prior
estimates due to the statutory allocation of a portion of the current biennium general fund
balance to the reserve. The stadium reserve balance is expected to grow $316 million during the
next biennium to $684 million. The cash flow account balance of $350 million is unchanged.
51
Planning Estimates
This forecast provides the first planning estimates for the FY 2026-27 biennium. While these
estimates inherently carry a higher degree of uncertainty than estimates for FY 2023-25, they do
present an outlook of longer run spending and revenue growth that will assist in budget planning
when setting the FY 2024-25 budget.
Revenue projections for FY 2024-27 are based on IHS’s February Baseline forecast for the planning
years. Expenditure projections assume that current law funding levels and policies continue
unchanged, adjusted for caseload and enrollment changes authorized in law, as well as formula-
driven growth. The expenditure forecast does not assume cost growth outside of a few specific
budget areas where assumptions for price increases or market conditions are specified by statute.
Planning Horizon: General Fund Budget

By Biennium, FY2024-27, November 2022 Forecast
$ Annual %
Forecast Revenues $60,281 $64,591 $4,310 3.5%
Projected Spending 53,953 56,161 2,208 2.0%
Difference $6,327 $8,430
Estimated Inflation (CPI) 3 $1,552 $3,309
To highlight structural balance, the table shows forecast revenues and projected spending and
excludes the impact of balances from prior years and reserves. In the FY 2024-25 biennium
forecast revenue is expected to exceed base level spending by $6.327 billion and in FY 2026-27
the structural balance is expected to grow to $8.430 billion due to revenue growth outpacing base
level spending growth.
Projected inflationary growth based on the Consumer Price Index is now forecast to be 3.0 percent
in FY 2024 and 2.5 percent in FY 2025. In the planning biennium inflation growth is expected to
be 2.2 percent per year in FY 2026 and FY 2027. After adjusting for programs with price increases
included in the current law formula, applying the annual inflation rate – compounded over 2 and
4 years – would add approximately $1.552 billion in spending pressure to the FY 2024-25 biennium
and $3.309 billion to FY 2026-27.
Since the biennial budget was enacted for the current biennium in the summer of 2021, actual
inflation experienced in FY 2021-23 has been significantly higher than assumed when
appropriations were set. The standard methodology used to calculate inflation in this document
accounts for projected inflationary growth into the next biennium and the planning estimates (FY
2024-27) but does not factor in any changes in inflation for the current biennium since the budget
for FY 2022-23 was enacted. The current circumstance, in which inflation in the current biennium
is materially higher than when the budget was enacted, could result in state agencies and
programs experiencing inflationary cost pressures that current appropriation levels do not
3
Inflation calculation grows the estimated general fund spending base in each year by the projected CPI
growth rate after removing special education, debt service, property tax refunds, and the state share for
managed and long term care in HHS.
52
anticipate and those cost pressures are not reflected in the base nor the calculated impact of
inflation in FY 2024-27 base spending levels.
Planning estimates are not intended to predict surpluses or deficits four years into the future;
rather, their purpose is to assist in determining how closely ongoing expenditures are likely to
match future revenues based on trends in the economy and the level of spending that is needed
to maintain programs and services. The FY 2026-27 planning estimates provide an important
baseline against which the longer-term impacts and affordability of budget decisions can be
measured.
53
REVENUE OUTLOOK
Current Biennium
Total general fund revenues for FY 2022-23 are now forecast to be $59.928 billion, $3.273 billion
(5.8 percent) more than the February 2022 forecast. Total tax revenues for the biennium are
forecast to be $57.303 billion, $2.709 billion (5.0 percent) above the prior estimate. The forecasts
for Minnesota’s three largest tax types are higher than in February.
Current Biennium: FY 2022-23 General Fund Revenues

November
End-of- 2022 $ %
Total Tax Revenues $54,594 57,303 2,709 5.0%
Non-Tax Revenues 1,626 2,116 490 30.1
Other Resources 435 509 75 17.2
Total Revenues $56,655 $59,928 $3,273 5.8%
Revenues for FY 2022-23 are now expected to exceed their FY 2020-21 levels by $9.449 billion
(18.7 percent). Total tax revenues are projected to be $9.566 billion (20.0 percent) more than in
FY 2020-21. Individual income tax revenues account for 58.4 percent of the biennial tax revenue
growth. Net sales tax receipts account for 22.8 percent of the growth. Corporate, state general
property tax, and other receipts in FY 2022-23 account for 18.8 percent of the growth and are
19.0 percent higher than in the previous biennium.
This is the third forecast of FY 2022-23 since FY 2022 began on July 1, 2021. After 16 months of
observed collections, fiscal year-to-date tax and non-tax revenues for FY 2022-23 are $39.582
billion, 66 percent of the total expected over the biennium. With 8 months of collections left to
observe, 34 percent of forecast tax and non-tax revenues are outstanding.
54
Biennial Comparison: FY 2020-21 vs. FY 2022-23 General Fund Revenues

November 2022 Forecast
$ %
General Sales Tax 11,915 14,092 2,177 18.3
Corporate Franchise Tax 3,798 5,183 1,386 36.5
Other Tax Revenue 4,101 4,535 434 10.6
Total Tax Revenues $47,738 $57,303 $9,566 20.0%
Non-Tax Revenues 1,739 2,116 377 21.7
Other Resources 1,003 509 -493 -49.2
Total Revenues $50,479 $59,928 $9,449 18.7%
Individual Income Tax. Minnesota individual income tax receipts are now forecast to be $1.785
billion (5.9 percent) more than the February forecast adjusted for law changes. The increase is
due to a higher estimate of base year tax liability and higher forecast growth in non-wage income.
At the close of FY 2022, net income tax revenue was $2.396 billion (16.5 percent) more than
forecast. The positive variance was primarily due to higher-than-expected income tax payments
and lower than expected refunds for tax year 2021. So far in FY 2023, net income tax receipts are
$58.8 million more than forecast.
Minnesota’s individual income tax receipts grew 18.6 percent ($2.6 billion) in FY 2022 over FY
2021, consistent with remarkable income tax growth across other U.S. states and the federal
government. The National Association of State Budget Officers (NASBO) reports that aggregate
state income tax revenues grew 11.5 percent in FY 2022, after growing 18.1 percent in FY 2021. 4
In the federal fiscal year ending September 30, the Congressional Budget Office (CBO) reported
that individual income tax receipts grew 29 percent ($588 billion) in FY 2022 over FY 2021, 5 after
growing 27 percent ($436 billion) in FY 2021 over FY 2020 6.
4
National Association of State Budget Officers (NASBO). “Summary: 2022 State Expenditure Report,”
November 18, 2022, page 7. Available here: https://www.nasbo.org/home.
5
Congressional Budget Office (CBO). “Monthly Budget Review: Summary for Fiscal Year 2022,” November
8, 2022, page 4. Available here: https://www.cbo.gov/publication/58592/html.
6
8, 2021, page 2. Available here: https://www.cbo.gov/publication/57539
55
Minnesota’s individual income tax receipts grew 18.6 percent ($2.6 billion) in fiscal year 22 over
fiscal year 21.
Pass-through businesses, typically S-Corporations and partnerships, may choose to pay a state-
level Pass-Through Entity (PTE) tax, which is deductible on their federal returns and credited
against Minnesota individual income tax. We report and forecast PTE tax receipts together with
the individual income tax.
This forecast builds from estimated final 2021 combined individual income and PTE tax liability.
Using information from processed income tax, S-Corp, partnership, and fiduciary tax returns;
revenue in the state accounting system; and projections of returns remaining to be processed, we
estimate that final 2021 income and PTE tax liability reported on individual tax returns is $15.031
billion, $1.610 billion more than our February estimate. We estimate that liability grew 25.2
percent in TY 2021 over TY 2020.
Calibrating the income tax model to produce our estimated base year liability generally requires
making assumptions about base year growth rates for specific income types. Since the November
2021 Budget and Economic Forecast, we have forecast wages and unemployment insurance (UI)
benefits together, because we think it results in a more accurate depiction of the distribution of
taxable income and helps explain the surprisingly high growth in tax liability for TY 2020. In this
forecast, growth in the combination of wages and UI benefits reported on tax returns is about
0.43 percent lower in TY 2021 than we assumed in the February forecast. Current information
from the Bureau of Economic Analysis (BEA) also indicates that Minnesota’s wage income in CY
2021 grew more slowly than we had forecast in February. The BEA reports wage income growth
of 7.2 percent, compared to the 8.4 percent growth that we assumed in the prior forecast.
To produce estimated tax year 2021 liability, capital gains realized by Minnesota residents were
assumed to have grown 79.0 percent from CY 2020, consistent with some preliminary information
on capital gains realizations from processed TY 2021 federal income tax returns and estimates
from some other Midwest states. This results in an estimated level of realizations that is 62.7
percent more than what we forecast in February. Taxable interest income in TY 2021 is assumed
56
to be 29.7 percent lower than in our February forecast. Non-farm business income is assumed to
grow 19.2 percent in TY 2021, resulting in a level of business income that is 10.2 percent higher
than we assumed in the February forecast.
A lower forecast of taxable income growth for CY 2022 only partially offsets the higher base year
income tax liability, resulting in a higher forecast for FY 2022-23 income tax revenues. For
example, wage and salary income growth in CY 2022 is lower in this forecast than in February.
Information from the BEA, Quarterly Census of Employment and Wages (QCEW), income tax
withholding collections, and our Minnesota economic forecasting model suggest that Minnesota’s
growth in wage and salary income has been weaker in CY 2022 than we forecast in February.
Annual growth in Minnesota wage income in 2022 is now expected to be 6.9 percent, down from
8.2 percent in the February forecast. Annual wage growth is now forecast to be 4.5 percent in CY
2023 compared to 5.2 percent in February. Compared to our February forecast, wage income
combined with UI benefits on Minnesota tax returns is forecast to be 1.6 and 2.3 percent lower
in CY 2022 and CY 2023, respectively.
Changes in expected growth rates in some non-wage income types in CY 2022 and 2023 also affect
the FY 2022-23 income tax forecast. Capital gains realizations reported by Minnesota residents
are now assumed to decline 44.7 percent in CY 2022 from the inferred very high level in 2021. We
expect a further decline of 7.0 percent CY 2023.
Consistent with IHS’ higher forecast for the federal funds rate, we assume that the effective rate
on interest-bearing deposits steadily increases until it reaches a level that is about 1.25
percentage points below the terminal federal funds rate. Therefore, the level of interest income
in this forecast exceeds the level in the February forecast for each year beyond CY 2021.
Compared to our February forecast, interest income on Minnesota tax returns is forecast to be
30.1 and 55.2 percent higher in CY 2022 and CY 2023, respectively.
This forecast includes an adjustment for the timing of individual income tax credits claimed by the
owners of PTEs. Large amounts of PTE tax payments for TY 2021 were made during FY 2022,
contributing to the $2.9 billion closing variance we reported for that fiscal year. Individuals with
PTE income may claim credits for those payments on their TY 2021 individual income tax returns,
reducing their income tax liability. However, to date the full amount of PTE payments made in FY
2022 has not been observed as credits on processed income tax returns. We have adjusted our
FY 2023 forecasts for individual income tax refunds and transfers to estimate tax to account for
the credits remaining to be claimed. Because the PTE tax is new, we do not have experience with
how taxpayers time the associated payments and refunds. Consequently, our allocation of the
remaining refunds across the first half of CY 2023 may result in variances in our monthly revenue
reports.
Technical changes to the House Income Tax Simulation (HITS) model reduced TY 2022 income tax
liability by $81 million, largely impacting FY 2023. A review of off-model law change estimates
reduced the forecast by $46 million in FY 2023.
We did not adjust the income tax forecast for any potential revenue gain from the Biden
administration’s federal student loan forgiveness program, because the program is currently not
being implemented by the federal government, and its economic impacts are not reflected in the
IHS November outlook.
57
New information that is expected to become available between now and February 2023 may
change the income tax forecast for FY 2023. Mid-January we expect to learn more about actual
tax liability for 2021, the year on which this forecast is based. In late January we will also observe
fourth quarter income tax withholding and estimated tax payments, which typically provide new
information about the liability year that just ended. Finally, in February, we expect to have the
first Minnesota-specific information about 2021 growth rates in various income types—including
capital gains—from a preliminary sample of 2021 tax returns. This should help identify income
growth arising from sources that are unlikely to carry over into subsequent years.
General Sales Tax. Net general sales tax revenue in FY 2022-23 is now forecast to be $269 million
(1.9 percent) more than the prior estimate. Both a $229 million increase in forecast gross sales
tax receipts and a $40 million reduction in expected refunds contribute to the change.
At the close of FY 2022, net sales tax receipts were $6.649 billion, $477 million (7.7 percent) higher
than in FY 2021. NASBO reports that aggregate state general sales tax revenues grew 13.6 percent
in FY 2022 after growing 9.7 percent in 2021. 7
In FY 2022, Minnesota’s net sales tax receipts were $477 million (7.7 percent) higher than in
FY 2021.
The increased forecast in the current biennium for gross sales tax receipts reflects higher than
expected gross receipts so far in FY 2023 and a higher near-term forecast for taxable sales
compared to February. Using forecasts for spending on a wide range of taxable goods and
services, we construct the Minnesota synthetic sales tax base, a proxy for the actual sales tax
base. The synthetic base grew 1.1 percentage points faster in FY 2022 than we forecast in
February. In this forecast the base is expected to grow 0.9 percentage points faster in FY 2023
than we expected in February.
7
58
The proxy for Minnesota’s sales tax base grew 12.8 percent in FY 2022, 1.1 percentage points faster
than we had assumed in February. In this forecast, the synthetic sales tax base grows 4.2 percent
in FY 2023, 0.9 percentage points faster than in February. We expect the synthetic sales tax base
to then decelerate to 0.3 percent growth in FY 2024.
Corporate Franchise Tax. The corporate franchise tax is forecast to generate $5.183 billion in FY
2022-23, $756 million (17.1 percent) more than the prior estimate. A higher base of gross
corporate tax receipts is the primary driver of this change.
Minnesota’s corporate receipts grew 25.0 percent ($564 million) in FY 2022 over FY 2021,
consistent with remarkable corporate tax growth across other U.S. states and the federal
government. NASBO reports that aggregate state corporate tax revenues grew 61.5 percent in FY
2022 after growing 47.1 percent in 2021. 8 In the federal fiscal year ending September 30, the CBO
reported that federal corporate receipts grew 14.0 percent in FY 2022 over FY 2021 9, after
growing 76.0 percent in 2021. 10
8
9
8, 2022, page 4. Available here: https://www.cbo.gov/publication/58592/html.
10
8, 2021, page 4. Available here: https://www.cbo.gov/publication/57539.
59
Minnesota’s corporate receipts grew 25 percent ($564 million) in fiscal year 2022 over fiscal year
2021.
The forecast change is due to a higher base of corporate receipts, which offsets a lower forecast
for corporate profits. At the close of FY 2022, net corporate tax receipts exceeded the February
forecast (adjusted for law changes) by $447 million (18.8 percent). Year-to-date net receipts for
FY 2023 are $93 million above the law-change-adjusted prior forecast. The previous corporate
forecast estimate was based on IHS’ February forecast, which assumed a year over year decline
of 4.8 percent in corporate profits in CY 2022 and -0.2 percent in CY 2023. In this forecast we use
IHS’ November 2022 baseline outlook which assumes growth of 5.3 percent in CY 2022, followed
by a 5.6 percent decline in CY 2023.
The forecast change is driven by a higher base of gross corporate tax receipts, which offsets a lower
forecast for corporate profits. The previous corporate forecast estimate was based on IHS’ February
forecast, which assumed a year over year decline of 4.8 percent in corporate profits in CY 2022 and
-0.2 percent in CY 2023. In this forecast we use IHS’ November 2022 baseline outlook which assumes
growth of 5.3 percent in CY 2022, followed by a 5.6 percent decline in CY 2023.
60
The corporate income tax forecast includes an off-model adjustment for the impact of the Historic
Structure Rehabilitation Credit (HSRC). Our practice is to forecast the full revenue impact of the
HSRC within corporate refunds, even though some credits accrue to non-corporate taxpayers, and
some credits reduce tax payments rather than increase refunds. Total HRSCs are now forecast to
be about $8 million lower in FY 2022-23 than the February forecast.
Other Tax Revenue, Non-Tax Revenue, Other Resources. Other tax revenue is now expected to
be $99 million (2.1 percent) lower than the prior estimate. Among other taxes, mortgage registry
taxes show the largest dollar amount change, $69 million (17.5 percent) lower than the prior
estimate. Estimated deed transfer receipts are $48 million (12.0 percent) lower than in the prior
forecast. The lower forecasts for these revenue sources are due to lower actual receipts in FY
2022 and year-to-date in FY 2023 year and lower forecasts for home sales and mortgage
refinances.
Non-tax revenues are now expected to be $490 million (30.1 percent) higher than our February
forecast. This is primarily due to an increased forecast for investment income, which is expected
to be $412 million higher than our prior estimate. Higher expected interest rates and a larger cash
balance drive this forecast change.
Next Biennium
Total revenues for FY 2024-25 are now estimated to be $60.281 billion, an increase of $353 million
(0.6 percent) over the current forecast for FY 2022-23 revenues. Total tax revenues for FY 2024-
25 are estimated to be $57.818 billion, a 0.9 percent increase over FY 2022-23 forecast revenues.
Growth of individual income tax and sales taxes account for nearly all the biennial tax revenue
change. Of the major tax types, the corporate franchise tax, the state general property tax, and
other tax revenues, show declines in expected revenues from FY 2022-23 to FY 2024-25.
Biennial Comparison: FY 2022-23 vs. FY 2024-25 General Fund Revenues

$ %
Individual Income Tax $31,959 $32,165 $206 0.6%
Corporate Franchise Tax 5,183 4,486 (697) (13.5)
State General Property Tax 1,534 1,492 (41) (2.7)
Other Tax Revenue 4,535 4,519 (16) (0.4)
Total Tax Revenues $57,303 $57,818 $515 0.9%
Non-Tax Revenues 2,116 2,266 151 7.1
Other Resources 509 197 (313) (61.4)
Total Revenues $59,928 $60,281 $353 0.6%
The current forecast for FY 2024-25 total revenues is $410 million (0.7 percent) more than the
end-of-session estimate. Total tax revenues for the next biennium are forecast to be $288 million
(0.5 percent) below the prior estimate. A lower forecast for individual income tax receipts, other
tax revenues, and state general property tax revenues are partially offset by higher forecasts for
61
general sales tax revenues and corporate tax receipts. A forecast change of $701 million (44.8
percent) in non-tax revenues more than offsets the lower forecast for tax revenues.

November
End-of- 2022 $ %
Individual Income Tax $33,140 $32,165 $(975) (2.9)%
Other Tax Revenue 4,751 4,519 (232) (4.9)
Total Tax Revenues $58,106 $57,818 $(288) (0.5)%
Non-Tax Revenues 1,565 2,266 701 44.8
Other Resources 200 197 (3) (1.6)
Total Revenues $59,871 $60,281 $410 0.7%
Individual Income Tax. Individual income tax revenues for FY 2024-25 are forecast to be $32.165
billion, $206 million (0.6 percent) more than the current forecast for FY 2022-23. This accounts
for 40.0 percent of the total tax revenue biennial change.
Regarding forecast change, lower forecast gross income tax receipts—driven by lower income
growth—and higher forecast refunds reduce the net income tax forecast $975 million (2.9
percent) from the prior estimate.
Growth in both wage and non-wage income sources are lower in this forecast than in February.
Compared to our February forecast, wage income combined with UI benefits on Minnesota tax
returns is forecast to be 2.3. 2.1, and 1.0 percent lower in CY 2023, 2024, and 2025, respectively.
Capital gains realizations reported by Minnesota residents are now assumed to decline 7.0
percent in CY 2023 compared to a 3.0 percent decline in the February forecast. In this forecast,
the level of capital gains realizations in CY 2023 is 6.1 percent lower than in February. Our
estimates of capital gains in CY 2024 and 2025 are 5.3 percent and 13.4 percent higher,
respectively. For CY 2024 and 2025, we have lowered our forecast of non-farm business income
growth to an average of 0.9 percent annually from an average of 4.9 percent annually in February.
The level of interest income in this forecast exceeds the level in the February forecast for each
year beyond 2021. Compared to our February forecast, interest income on Minnesota tax returns
is forecast to be 120.4 and 188.2 percent higher in CY 2024 and CY 2025, respectively.
By statute, Minnesota tax brackets and other parameters of the state tax code are indexed by the
chained CPI-U. Inflation as measured by the chained CPI-U is now forecast to be higher than it had
been in February. This has the effect of reducing forecast liability in TY 2023 by $100 million
(primarily lowering revenues in FY 2024) and TY 2024 by $318 million (primarily lowering revenues
in FY 2025).
62
Technical changes to the HITS model reduced income tax liability by $114 million in TY 2023 and
$136 million in TY 2024, mainly affecting FY 2024 and FY 2025. A review of off-model law change
estimates reduced the forecast by $67 million in FY 2024 and $69 million in FY 2025.
General Sales Tax. Net general sales tax receipts for FY 2024-25 are expected to exceed FY 2022-
23 levels by $1.063 billion (7.5 percent), offsetting declines in corporate, statewide property tax,
and other revenues. Growth in forecast gross sales tax receipts and an increase in refunds
between FY 2022-23 and FY 2024-25 both contribute to the biennial change.
Gross sales tax receipts in FY 2024-25 are forecast to exceed FY 2022-23 levels by $1.084 million
(7.5 percent). The Minnesota synthetic sales tax base, a proxy for the actual tax base, is expected
to grow 4.2 percent in FY 2023 before decelerating to 0.3 percent growth in FY 2024, 2.4
percentage points slower than we forecast in February. The synthetic sales tax base is expected
to grow 3.3 percent in FY 2025. As in the past, the percentage changes in the synthetic base have
been reduced by 5 percent to correct for a tendency of the base to grow faster than observed
revenue growth. For example, a one percent change in the synthetic tax base implies a 0.95
percent change in sales tax revenue.
Regarding forecast change, higher expected refunds partially offset higher expected gross sales
tax receipts to bring the net sales tax forecast $92 million higher than the end-of-session estimate.
Gross sales tax receipts for FY 2024-25 are now forecast to be $114 million (0.7 percent) higher
than the prior estimate. The forecast change is due to a higher base of gross sales tax receipts
from the higher forecast for FY 2022-23, which is partially offset by lower forecast growth in
taxable sales for FY 2024-25. The synthetic sales tax base is expected to grow a cumulative 2.3
percentage points slower between FY 2023 and FY 2025 than we assumed in the prior projection.
Corporate Franchise Tax. The corporate franchise tax is forecast to generate $4.486 billion in FY
2024-25, $697 million (13.5 percent) less than the current FY 2022-23 forecast.
Gross corporate receipts are forecast to decline by $697 million from FY 2022-23 to FY 2024-25.
This decline is the result of a slowdown in corporate profits arising from a three-quarter U.S.
recession that is expected to impact corporate tax receipts in FY 2024. Corporate refunds are
forecast to grow across the biennia by $60 million, contributing to the biennial decline in net
corporate taxes.
Regarding forecast change, a higher forecast for FY 2024-25 gross corporate tax receipts offsets a
higher refund forecast to generate a $832 million (22.8 percent) increase in net expected
corporate receipts. The forecast change is due to a higher base of gross corporate tax receipts
expected in FY 2022-23, which more than offsets a lower forecast for corporate profits. The
previous corporate forecast estimate was based on IHS’ February forecast, which assumed a year
over year decline of 5.0 percent in corporate profits in CY 2024 and 4.9 percent growth in CY 2025.
In this forecast we use IHS’ November 2022 baseline outlook, which assumes growth of 0.2
percent in CY 2024, followed by 0.9 percent in CY 2025.
Other Tax Revenue, Non-Tax Revenue, Other Resources. Other tax revenue is now forecast to
decline $16 million (0.4 percent) in FY 2024-25 over FY 2022-23. Non-tax revenues are now
expected to be $701 million (44.8 percent) higher than our February forecast. This is primarily due
to an increased forecast for investment income, which is expected to be $723 million higher than
63
our prior estimate. Higher expected interest rates and a larger cash balance drive this forecast
change.
Planning Estimates
This is the first reporting of revenue planning estimates for FY 2026-27. Total revenues for the
biennium are now estimated to be $64.591 billion, an increase of $4.310 billion (7.2 percent) over
the current forecast for FY 2024-25 revenues. Total tax revenues for 2026-27 are estimated to be
$62.823 billion, an increase of $5.005 billion (8.7 percent) over FY 2024-25.
Planning Estimates: FY 2026-27 General Fund Revenues

$ %
Other Tax Revenue 4,519 4,842 323 7.1
Total Tax Revenues $57,818 $62,823 $5,005 8.7%
Non-Tax Revenues 2,266 1,642 (624) (27.5)
Other Resources 197 126 (71) (35.9)
Total Revenues $60,281 $64,591 $4,310 7.2%
Together, the individual income and sales taxes account for about 90 percent of the projected
biennial tax revenue growth. The individual income tax shows the largest increase, growing by
$3.475 billion (10.8 percent), and contributing 69 percent of the total tax revenue biennial change.
The general sales tax is expected to exceed FY 2024-25 forecast levels by $1.051 billion (6.9
percent), accounting for 21 percent of the growth in tax revenues. The corporate franchise tax is
expected to exceed FY 2024-25 forecast levels by $159 million (3.5 percent), accounting for 3
percent of the growth in tax revenues. The other taxes account for the remaining $321 million of
biennial growth.
The revenue planning estimates are based on the IHS baseline forecast, which assumes U.S. real
GDP will grow 1.8 percent in CY 2025 followed by 1.9 percent in CY 2026 and 1.8 percent in CY
2027.
The planning estimates for FY 2024-25 should be used with caution. First, the projections will be
affected by any revenue changes in the supplemental budget for FY 2022-23 and the enacted
budget for FY 2024-25. Second, in subsequent forecasts changes to our estimates of individual
income tax liability for tax years 2022 through 2025, as well as changes to the base levels of other
revenue types for FY 2023 through 2025, will change the FY 2026-27 planning estimates. Third,
even small deviations from assumed growth rates for factors affecting revenues will compound
and produce sizable changes in revenues. Should the economy grow more slowly (quickly) than
forecast or should some volatile income source such as capital gains or corporate profits fall well
below (above) forecast, the revenue outlook for FY 2026-27 will deteriorate (improve). Finally,
64
Minnesota’s Council of Economic Advisers warn that the difficulty of projecting long range
economic conditions warrants caution when using economic forecasts of 2026 and 2027. The IHS
baseline forecast calls for modest real GDP growth of less than 2.0 percent from 2024-2027. This
slow growth leaves the economy vulnerable to negative shocks, such as geo-political conflicts,
natural disasters, and financial market volatility, which could cause growth in the planning
estimate years to underperform IHS’ expectations.
65
EXPENDITURE OUTLOOK
Current Biennium
Total spending in the FY 2022-23 biennium is lower than prior estimates. Expenditures in the
current biennium are now expected to be $51.779 billion, a reduction of $1.521 billion (2.9
percent) from end-of-session estimates.
Current Biennium: FY 2022-23 General Fund Expenditures

November 2022 $ %
E-12 Education $20,503 $20,223 $(280) (1.4)%
Debt Service 1,183 1,140 (43) (3.6)
All Other 10,622 10,533 (89) (0.8)
A $1.104 billion (6.8 percent) reduction in estimated spending for health and human services
(HHS) and a $280 million (1.4 percent) reduction in estimated spending for E-12 education
account for nearly all of the overall reduction in spending in the FY 2022-23 biennium.
Changes for the current biennium for other spending were modest. Debt service expenditures are
$43 million (3.6 percent) lower than previous estimates primarily due to slower-than-expected
spending on capital projects, resulting in a smaller-than-expected August 2022 bond sale.
Property tax aids and credits spending is $5 million (0.1 percent) lower than expected largely
attributable to FY 2022 actual payments for the homestead credit refund and renters’ property
tax refund coming in lower than expected.
E-12 Education. Education finance is the largest category of state general fund spending. It
consists of aid programs for general education, special education, early childhood and family
education, charter schools, nonpublic pupil programs, and integration programs. E-12 aids can be
divided into two major funding streams: 1) general education, the primary source of basic
operating funds for schools, and 2) categorical aid, funding tied to specific activities or categories
of funding. In the current biennium, the state is projected to spend $20.223 billion on education.
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E-12 Education Pupils, Actual and Projected

Pupils by State Fiscal Year
E-12 education pupil projections are lower than end-of-session estimates for the FY 2022-23 and
FY 2024-25 biennia and are projected to decrease into the FY 2026-27 biennium.
E-12 education spending in the current biennium is down $280 million (1.4 percent) from prior
estimates, driven primarily by lower pupil counts. Preliminary actual FY 2022 counts are lower
than previously estimated by 12,540 (1.4 percent). Lower counts in FY 2022 also reduce the
estimate for FY 2023, which is is down 13,381 (1.5 percent). The Minnesota Department of
Education (MDE) uses near term growth trends based on historical data and other factors to
project pupil counts. This new information about actual enrollment trends is the primary cause of
the decrease relative to the previous forecast. Pupil counts are expected to be flat for FY 2022
and FY 2023 followed by decreases through the remainder of the forecast horizon.
A decreasing number of births to Minnesota residents in recent years is the primary cause of the
downward long-term trend. Births correlate to the number of early childhood and kindergarten
enrollments in future years. Birth counts have been on a steady downward trend since calendar
year (CY) 2014. While births in CY 2021 increased over an anomalously low CY 2020 total, actual
birth counts from CY 2021, as well as preliminary data for CY 2022, indicate that the long-term
downward trend will persist.
Pupils are the primary factor in most E-12 education aid formulas in Minnesota. The largest
formula, general education, is estimated to be $201 million (1.3 percent) lower than prior
estimates. Special education and charter school lease aid are also down by $59 million (1.6
percent) and $11 million (6.2 percent) respectively. All other E-12 spending is down $7 million (0.5
percent).
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General Fund Education Expenditures

FY 2022-23 FY 2024-25
$ % $ %
($ in millions) Change Change Change Change
Basic Formula $(172) (1.3)% $(190) (1.5)%
Compensatory 1 0.1 407 37.4
Other General Education (30) (2.4) (96) (7.6)
General Education Subtotal (201) (1.3) 121 0.8
Special Education (59) (1.6) (92) (2.2)
Charter School Lease Aid (11) (6.2) (13) (6.2)
All Other (7) (0.5) (7) (0.4)
Total E-12 General Fund Change $(280) (1.4)% $9 0.0%
Health & Human Services. Health and Human Services (HHS) is approximately 29 percent of total
state general fund spending. The majority of these expenditures (82 percent) are forecast
programs including Medical Assistance (MA), Chemical Dependency (CD), the Minnesota Family
Investment Program (MFIP), MFIP Child Care Assistance Program (CCAP), Alternative Care (AC),
General Assistance, Housing Support, Minnesota Supplemental Aid, and Northstar Care for
Children.
General fund forecast changes are generally driven by changes to the MA forecast, since it
accounts for the largest portion of forecast program expenditures. MA is a state-federal, means-
tested entitlement program for low-income individuals and families, persons with physical or
developmental disabilities, and low-income older adults. MA costs are split between the state and
federal government, though only the state share of expenditures is reflected in the general fund
forecast.
In the FY 2022-23 biennium, anticipated HHS general fund spending is $15.234 billion, down
$1.104 billion (6.8 percent) from end-of-session estimates. A $1.172 billion (9.5 percent)
reduction in MA explains the majority of the change. This forecast also incorporates $78 million
of allocations made from the $190 million COVID-19 Management general fund appropriation.
These allocations were originally appropriated in another bill area, so the spending was reflected
there in prior estimates. These allocations largely explain the growth outside of forecast programs
in the HHS forecast.
Decreases in state expenditures in the current biennium are attributable to reductions in the MA
forecast. MA spending in the current biennium is down $1.172 billion (9.5 percent) from end-of-
session estimates. The largest factor contributing to this change is the recognition of a three
quarter extension of the federal public health emergency (PHE) through January 2023. As part of
the federal government’s Families First Coronavirus Response Act, the state receives an additional
6.2 percent federal match (FMAP) on the state’s MA claims for each calendar quarter a federal
public health emergency related to COVID-19 remains active for at least one day. The November
2022 forecast assumes the state will receive this additional federal match through March 2023.
These three additional calendar quarters provide an additional $762 million in enhanced federal
match.
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General Fund Health and Human Services Expenditures

FY 2022-23 FY 2024-25
$ % $ %
($in millions) Change Change Change Change
Extension of the COVID-19 Emergency $(603) (4.9)% 101 0.7%
Declarations (Includes FMAP Extension)
Increase Base FMAP to 51.49% - - (180) (1.3)
Pharmacy Rebates (259) (2.1) (164) (1.1)
Basic Care Average Payments (138) (1.1) (481) (3.3)
Nursing Facility Caseload (58) (0.5) (123) (0.9)
Basic Care Caseload 100 0.8 244 1.7
Other MA (214) (1.7) 1 0
Total MA General Fund Change (1,172) (9.5) (602) (4.2)
Reduced CCAP Expenditures (37) (0.2)% (143) (0.8)
All other HHS changes 105 0.6 23 0.1%
Total HHS General Fund Change $(1,104) (6.8)% $(722) (3.9)%
The state must provide, except in limited circumstances, continuous coverage to individuals
enrolled in MA as a condition of receiving the enhanced FMAP. Following the end of the PHE, the
state must redetermine the eligibility of all current enrollees. As assumed in the end-of-session
forecast, the state will begin redetermining eligibility after the PHE’s end and complete these
renewals within 14 months after the end of the PHE. The unwinding of the continuous coverage
results in higher caseload levels that partially offsets the additional FMAP. The net impact of the
PHE extension and the additional caseload is a reduction of $603 million (4.9 percent) in state
spending this biennium.
Higher actual and expected pharmacy rebates further reduce MA expenditures by $259 million
(2.1 percent) in the current biennium from end-of-session estimates. The Medicaid Drug Rebate
Program provides drug manufacturers with access to the Medicaid program in exchange for
rebates on outpatient prescription medications. These pharmacy rebates reduce MA program
costs and are received after the actual claim is paid. The state received substantially more
pharmacy rebates in FY 2022 than assumed in the end-of-session forecast due to higher caseload
levels. The higher rebates in FY 2022 are assumed to continue in future years. This forecast reflects
ongoing updates to better reflect the impact of changing enrollment on pharmacy rebates.
Lower than expected MA payments for basic health care services reduce state spending in the
current biennium by $138 million (1.1 percent). Approximately 80 percent of basic care spending
is made through monthly payments to health plans for coverage of MA enrollees, referred to as
managed care capitation payments. Actuaries develop and certify managed care rates, which are
included in health plan contracts for the following calendar year. Rates for CY 2023 were based
upon the actual cost experience of health plans during CY 2021. Managed care rates for CY 2023
are lower than expected across all eligibility categories, primarily due to lower than expected
actual base cost experience of the plans. The end-of-session forecast assumed adults without
children and families with children calendar year 2023 rates would increase 3.0 percent over
calendar year 2022 rates. The actual rates decreased 2.3 percent and 5.3 percent respectively.
69
Elderly basic and disabled basic care rates were expected to increase 5 percent over 2022 rates,
but the actual rates increased 3.2 percent and decreased 1.6 percent. This forecast holds the same
long-term growth assumptions in managed care payment rates as prior forecasts.
In addition, this forecast recognizes a reduction in nursing facility caseload, which lowers state
MA expenditures by $58 million (0.5 percent) from end-of-session estimates. In the end-of-
session forecast, the state assumed that utilization of nursing facilities would increase following
the peak of the Delta and Omicron COVID-19 surges. The expected increase in utilization has not
materialized, leading to a reduction in caseload projections.
These spending reductions are partially offset by increased enrollment among the state’s basic
care populations. Basic care refers to individuals receiving health care services, rather than long
term care services. Increased caseload results in an additional $100 million (0.8 percent) of state
MA spending over end-of-session estimates. This increase reflects higher-than-forecast actual
enrollment since the February 2022 forecast. This caseload increase is separate from the impact
of the PHE continuous coverage provisions and is expected to continue into the next biennium.
Outside the MA program, use of the CCAP is 21.4 percent lower than end-of-session estimates.
Previous estimates assumed utilization of forecast child care assistance would increase to pre-
pandemic levels by the end of this biennium. However, the expected growth has not materialized
in recent months. Consequently, this forecast assumes lower caseload levels. This reduced
utilization eliminates the entire $37 million general fund share of the child care program in the
current biennium, with the entire program supported by federal funds. The state share returns
in future years.
Property Tax, Aids, and Credits. Property tax aids and credits are approximately 9.0 percent of
general fund spending. They are paid to local governments, including cities, counties, towns,
public schools, and special taxing districts. These aids and credits help offset costs of service
delivery and defray costs of state mandates. They are designed to reduce the reliance on local
property taxes by substituting state funds for revenues that would otherwise be raised locally.
Direct payments to individuals, like property tax refunds for homeowners and renters, are also
included in this category because they provide targeted property tax relief.
Property tax aids & credits spending is down $5 million (0.1 percent) in the current biennium,
largely attributable to a decrease in FY 2022 actuals for the homestead credit refund and renters’
property tax refund. These decreases are slightly offset by a projected increase in these programs
in the second year of this biennium.
Debt Service and All Other Spending. Debt service expenditures for the current biennium total
$1.140 billion, which is a $43 million (3.6 percent) reduction from prior estimates. The reduction
is primarily due to slower-than-expected spending on capital projects, resulting in a smaller-than-
expected August 2022 bond sale. Higher-than-expected investment income and savings realized
from an August 2022 bond refunding also contributed to this reduction. These savings were
partially offset by higher bond interest rates realized in the August 2022 bond sale, resulting in
lower bond premiums, which together increase the estimated size of the bond sales and future
debt service payments.
Each forecast includes assumptions about the size of future capital budgets. In general, the
assumptions are based on the 10-year average size of capital budget bills and differentiate
70
between the larger even-year capital budgets and smaller odd-year capital budgets. However,
the forecast applies a different methodology when the legislature does not enact a bonding bill
in an even year. In the February 2022 forecast, the debt service forecast assumed an $880 million
capital budget in even years and a $135 million capital budget in odd years. Because a capital
budget bill was not enacted during the 2022 legislative session, this forecast assumes a larger
$880 million capital budget for the 2023 legislative session and maintains the previous
assumptions of $880 million capital budgets for even-year legislative sessions and $135 million
capital budgets in odd-year legislative sessions.
All other spending is forecast to be $10.532 billion, $90 million (0.8 percent) lower than end-of-
session estimates. This decrease is largely attributable to decreases of $69 million (3.6 percent) in
state government & veterans due to $80 million of allocations to other bill areas from the $190
million COVID-19 Management appropriation, $15 million (4.0 percent) in capital projects &
grants, and $10 million (0.4 percent) in public safety & judiciary bill areas. These spending
reductions were partially offset by a $4 million (0.9 percent) increase in transportation spending
and a $5 million (25.0 percent) reduction in cancelation estimates.
In 2022, the Department of Administration completed the sale of the building it purchased in FY
2020 for use as a cold storage facility and the proceeds of the sale were deposited into the general
fund. The building was originally purchased with a COVID-19 Minnesota fund appropriation but
was largely reimbursed by the Federal Emergency Management Administration (FEMA). This
forecast includes a general fund transfer of approximately $5 million in FY 2023 to repay FEMA its
portion of the costs.
Next Biennium
$ %
E-12 Education $20,223 $21,252 $1,029 5.1%
Debt Service 1,140 1,147 7 0.6
All Other 10,532 9,271 (1,262) (12.0)
Forecast expenditures in the FY 2024-25 biennium are expected to reach $53.953 billion, an
increase of $2.175 billion (4.2 percent) over the FY 2022-23 biennium. Driving the overall increase
is growth of $2.578 (16.9 percent) in HHS, where MA spending accounts for a majority of the
biennial change. E-12 spending is expected to grow $1.029 billion (5.1 percent) due to higher
compensatory revenue and special education spending. Spending for property tax aids and credits
is expected to be $176 million (3.8 percent) lower than the current biennium. Debt service is
expected to grow $7 million (0.6 percent) compared to FY 2022-23. Offsetting the overall growth
is $1.262 billion (12.0 percent) lower spending in the other areas of state government, due in large
part to one-time spending in FY 2022-23.
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Overall spending in the FY 2024-25 biennium is expected to be down $600 million (1.1 percent)
compared to prior estimates. A reduction in HHS spending estimates, largely driven by lower
managed care payments, explains more than all of the change. These reductions are partially
offset by higher than anticipated spending in property tax aids and credits, primarily due to
increases in the property tax refund program. E-12 spending is relatively unchanged, driven by
two offsetting items: an increase in compensatory revenue and a decrease in projected pupils.
Other areas of the state budget have little change compared to prior estimates.

Change from End-of-Session
November 2022 $ %
E-12 Education $21,242 $21,252 $9 0.0%
Health & Human Services 18,533 17,811 (722) (3.9)
Debt Service 1,149 1,147 (2) (0.2)
All Other 9,286 9,271 (16) (0.2)
Total Expenditures $54,553 $53,953 ($600) (1.1%)
E-12 Education. E-12 expenditures in FY 2024-25 are forecast to reach $21.252 billion, growing
$1.029 billion (5.1 percent) relative to FY 2022-23. The two largest drivers of biennial growth are
compensatory revenue and special education. Compensatory revenue payments are forecast to
be $527 million (54.4 percent) higher in FY 2024-25 than FY 2022-23. This growth is due in part to
a return from abnormally low payments in FY 2022-23. FY 2022-23 biennial compensatory
revenue was based on fall 2020 and fall 2021 student counts. Compensatory revenue in these
years was abnormally low due to the pandemic and federal policies that provided free meals to
all students, resulting in fewer households submitting income forms that qualify them for FRP
meals and compensatory revenue. This growth also a reflects changes in the state’s processes for
enrolling students in free or reduced-price (FRP) meals, which are discussed in greater detail on
the following page.
Another large driver of biennial growth is special education, which is increasing $431 million (12.1
percent). While most E-12 education spending does not include inflation, special education is
primarily a cost reimbursement program, so instructional and transportation cost inflation
contribute to biennial growth.
Relative to end-of-session estimates, overall E-12 education spending is expected to be $9 million

(0.0 percent) higher in FY 2024-25. The significant increase in compensatory revenue ($407
million; 37.4 percent) discussed above is offset by reductions in the pupil forecast impacting
programs such as the general education basic formula ($190 million, 1.5 percent), other general
education ($96 million; 7.6 percent), and special education ($92 million, 2.2 percent). The pupil
forecast is lower than end-of-session estimates by 1.6 percent in FY 2024 and 1.5 percent in FY
2025 as a result of lower enrollment in recent years, as discussed above.
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Compensatory Education Revenue and Direct Certification Through Medicaid
Compensatory education revenue, also referred to as “compensatory revenue,” is state funding

to help meet the “educational needs of pupils who enroll under-prepared to learn and whose
progress toward meeting state or local content or performance standards is below the level that
is appropriate for learners of their age..” 11
Compensatory revenue amounts are calculated, per statute, based on the number of students
qualifying for FRP meals in the federal meal program, as well as the concentration of such students
at each school site. Prior to school year 2022-23, eligibility for FRP meals occurred primarily via
either submission of a household income form or via “direct certification” with a limited number
of Department of Human Services programs. Direct certification refers to a process for
determining student eligibility for meal benefits based on documentation obtained directly from
a state or local agency.
E-12 Compensatory Revenue

Amounts in Millions of Dollars, by State Fiscal Year
E-12 compensatory revenue is projected to increase in FY 2024 after years of declining.
Starting in the current school year, Minnesota is participating in a U.S. Department of Agriculture
demonstration project that enables FRP enrollment to occur via direct certification for children
enrolled in Medicaid (DCM) and who meet FRP income eligibility based on Medicaid income
calculations. DCM increases the number of students qualifying for FRP meals because it provides
automatic enrollment without the need for a household to submit a form and because it uses a
slightly different definition of household than the traditional meal program does.
Preliminary data submitted by districts to MDE in fall 2022 indicate that approximately 75,000
more students than previously forecast will qualify for compensatory revenue. Compensatory
revenue is received in the fiscal year following the count of eligible students; that is, the fall 2022
(FY 2023) student data impacts FY 2024 compensatory revenue.
11
Minnesota Statutes 2022, 126C.15, subd. 1.
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Health & Human Services. General fund spending for HHS is expected to reach $17.811 billion in
the FY 2024-25 biennium, an increase of $2.578 billion (16.9 percent) from the current biennium.
As in previous forecasts, MA is the primary driver of the biennial change.
General fund spending in MA is expected to grow $2.606 billion (23.3 percent) from FY 2022-23
to FY 2024-25, primarily as a result of changes in the federal share of the program. In general,
growth in total MA spending is due to two factors: the cost of care and enrollment. However,
changes in the federal share of the program also drive changes in state spending. In this case, the
end of the federal PHE exacerbates the growth. This forecast assumes the state will have the
enhanced 6.2 percent FMAP for seven of the eight calendar quarters in the current biennium
compared to zero in the next biennium. The state currently expects to receive $1.586 billion in
enhanced FMAP this biennium, much of which has been reflected in prior forecasts. This
enhanced match temporarily reduces the state share of MA but does not change long-term
program trends. Consequently, total MA payments and the state share of those payments
increase in the FY 2024-25 biennium following the end of the enhanced matching rate.
Overall HHS general fund spending is down $722 million (3.9 percent) in FY 2024-25 compared to
prior estimates. Changes to the MA program explain most of the reduction ($601 million, or 83.2
percent of the change from end-of-session estimates). The largest driver of the reduced spending
is lower basic care average payments. Lower managed care rates for CY 2023 result in lower
projected rates in future years, reducing state MA expenditures by $481 million (3.3 percent)
relative to end-of-session estimates.
The state’s base FMAP is increasing in FY 2024, lowering expected state spending by $180 million
(1.3 percent) in the FY 2024-25 biennium. The Centers for Medicaid and Medicare Services
recently announced a 0.70 percentage point increase to Minnesota’s baseline FMAP from 50.79
percent to 51.49 percent starting October 1, 2023. This increase is a result of changes in
Minnesotan’s personal income compared to the national average and is unrelated to changes in
the federal PHE. This additional match is not conditioned on any program changes. This forecast
assumes this increased federal share continues through the forecast horizon.
Higher forecast pharmacy rebates continue in the FY 2024-25 biennium, which reduces state
expenditures $164 million (1.1 percent) from end-of-session estimates. The base adjustment from
higher-than-expected pharmacy rebate collections in FY 2022 continues into this biennium.
However, the savings is lower due to the sunsetting of the state’s Drug Formulary Committee at
the end of the FY 2022-23 biennium. This committee manages the state’s preferred drug list,
which generates supplemental pharmacy rebates. Without this committee, the state cannot
manage the preferred drug list and would therefore have no ability to negotiate the collection of
supplemental rebates. This results in an annual reduction of approximately $36 million in the
state’s share of supplemental rebates, which partially reduces the stronger base rebate
projections.
The continued impact of reduced nursing facility caseload projections relative to the previous
forecast reduces state expenditures by $123 million in the FY 2024-25 biennium. The assumption
of flat average monthly caseload levels in nursing facilities continues throughout the forecast
horizon.
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These reductions are partially offset by higher MA basic care caseload levels, which increases state
spending $244 million (1.7 percent). This change is primarily explained by higher-than-projected
actual caseload levels in the FY 2022-23 biennium, which is expected to continue into the next
biennium. Additionally, basic care caseload levels are expected to increase as a result of a mild
recession projected in the economic forecast.
The extension of the PHE and the subsequent unwinding of the continuous coverage
requirements are projected to increase costs in the FY 2024-25 biennium. An extension of the PHE
to January 2023 delays the completion of eligibility redeterminations of all MA enrollees into the
FY 2024-25 biennium. This results in higher caseload levels and increases state spending $101
million (0.7 percent) from end-of-session estimates. However, unlike in the current biennium,
these costs are not offset by an enhanced federal match.
Outside of the MA program, the continued reduction in CCAP program utilization reduces state
HHS expenditures by $143 million (0.8 percent) in the FY 2024-25 biennium. Caseload is down
19.4 percent from the end-of-session estimates because of slower increases in utilization.
MFIP CCAP Utilization

Average Monthly Recipients, By State Fiscal Year
Utilization of the CCAP program is down all years over the forecast horizon.
Property Tax, Aids, and Credits. In the next biennium, property tax aids and credits spending is
expected to be $4.473 billion, a decrease of $176 million (3.8 percent) from FY 2022-23. This
reduction is a result of several one-time appropriations in the current biennium, including Front
Line Worker Aid ($500 million) and one-time local government assistance to counties ($29
million). These decreases are partially offset by $248 million (14.7 percent) growth in property tax
refund programs.
Property tax aids and credits spending is forecast to be $130 million (3.0 percent) above prior
estimates. Changes in property tax refunds account for a significant portion of this change.
Compared to prior estimates, homestead credit refunds are projected to increase by $82 million
(6.2 percent) due to inflation, relatively slower income growth, residential homestead market
75
value growth, and higher local government property tax levies. The increases in market values
and property tax levies also impact the special property tax refund, which is forecast to be $14
million (132.7 percent) more than end-of-session estimates. Renters’ property tax refunds are
also projected to increase and are up $19 million (4.1 percent) due to more people applying for
the refund, inflation, and wage growth.
The school building bond agricultural credit is forecast to be $13 million (7.4 percent) more than
prior projections due to greater referenda passage in the November 2022 election and an
increased school debt service forecast.
Debt Service and All Other Spending. Debt service expenditures total $1.147 billion in the next
biennium, which is $2 million (0.2 percent) lower than prior estimates. The reduction is due to an
increase in short-term investment earnings on cash balances and is nearly offset by the increase
in debt service payments. This estimate reflects higher interest rate assumptions on future bond
sales and slightly higher spending on capital projects. It also reflects the assumption of a larger
capital budget in CY 2023 compared to previous estimates, thus increasing the size of projected
bond sales and future debt service costs. Higher bond interest rates result in lower bond
premiums, which together increase the estimated size of future bond sales and debt service
payments.
Expenditures in all other areas of the state budget are expected to be $9.272 billion, $1.260 billion
(12.0 percent) lower in FY 2024-25 compared to the current biennium. This reduction is largely
attributable to one-time spending in the current biennium, such as the $190 million COVID-19
Management appropriation.
Estimated spending in all other bill areas is $16 million (0.2 percent) lower than prior estimates,
largely attributable a $13.1 million (3.7 percent) decrease in anticipated capital projects & grants
spending and a $6.1 million (0.2 percent) reduction in public safety & judiciary spending.
Planning Estimates
Planning Estimates: FY 2026-27 General Fund Expenditures
$ %
E-12 Education $21,252 $21,459 $207 1.0%
Debt Service 1,147 1,257 111 9.6
All Other 9,271 8,972 (299) (3.2)
Total projected spending in the FY 2026-27 biennium is expected to reach $56.161 billion, an
increase of $2.208 billion (4.1 percent). The growth trends in the major forecast programs remain
the same as described for FY 2024-25 with growth in HHS spending accounting for most of the
increase due to continued growth in MA spending. Increases in E-12 education spending is largely
76
due to program cost growth in special education. Property tax aids and credits growth is primarily
due to higher property tax refunds.
E-12 Education. Spending in E-12 education in FY 2026-27 is expected to reach $21.459 billion,
growing $207 million (1.0 percent) from FY 2024-25. Inflationary increases in special education
costs are the largest driver of growth. Special education spending is estimated to grow by $447
million (11.2 percent) due to an increase in students qualifying for services and increased service
costs. This increase is offset by a decrease in general education spending estimated at $261 million
(1.7 percent) caused primarily by declining statewide pupil counts, as well as increased property
tax valuations driving more program funding to property tax levies rather than state aid.
Health & Human Services. HHS expenditures are projected to be $19.881 billion in the FY 2026-
27 biennium, an increase of $2.070 billion (11.6 percent) compared to the FY 2024-25 biennium.
Nearly all the biennial increase is driven by MA, which is expected to grow $1.849 billion (13.4
percent) between these biennia.
Growth in MA is driven by services for the elderly and people with disabilities. State spending is
expected to increase $1.240 billion (12.1 percent) on these services in the following biennium.
This increase is due to enrollment growth in home and community-based services, as well as
growth in enrollment and average elderly and disabled basic care capitation payments. State
spending for families with children and adults without children is expected to grow by $230 million
(6.1 percent).
Property Tax, Aids, and Credits. In FY 2026-27, property tax aids and credits spending is forecast
to total $4.592 billion, which is $119 million (2.7 percent) more than FY 2024-25 estimates.
Property tax refunds continue to increase, with the $76 million (5.5 percent) in anticipated growth
occurring principally in the homestead credit refund and renters’ property tax refund programs.
Additionally, school building bond agricultural credits increase in the planning estimates by $17
million (9.1 percent) due to an increase in the school debt service forecast. Additionally, police
state aid payments to local governments are expected to increase by $17 million (9.2 percent).
The increase in these payments is driven by the anticipated increase in tax collections on auto
insurance premiums, which are then distributed to units of local government to offset law
enforcement pension costs.
Debt Service. Debt service costs for the FY 2026-27 biennium total $1.257 billion, an increase of
$111 million compared to the FY 2024-25 biennium. This increase is primarily attributable to a
combination of delayed agency spending on authorized projects and a larger capital budget
assumed during the 2023 legislative session.
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APPENDIX
ECONOMIC DATA
Minnesota Economic Forecast Summary ................................................................................79
U.S. Economic Forecast Summary ...........................................................................................80
Alternative Economic Forecasts Comparison .........................................................................81
IHS Baseline Economic Forecasts Comparison ........................................................................81
Economic Forecasts Comparison: Minnesota and U.S. ...........................................................82
Economic Factors Affecting Tax Revenue ...............................................................................83
REVENUE EXPERIENCE
Current Fiscal Year-to-Date: End-of-Session vs. Actual Comparison .......................................86
GENERAL FUND BALANCE SHEETS

Current Biennium: By Fiscal Year .............................................................................................87
Current Biennium: Forecast Comparison.................................................................................88
Next Biennium: By Fiscal Year ..................................................................................................89
Next Biennium: Biennial Comparison ......................................................................................90
Next Biennium: Forecast Comparison .....................................................................................91
Planning Estimates: By Fiscal Year ...........................................................................................92
Planning Estimates: Biennial Comparison ...............................................................................93
Planning Estimates: Forecast Comparison ...............................................................................94
Planning Horizon: By Biennium................................................................................................95
OTHER DATA
Historical and Projected Revenue Growth ..............................................................................96
Historical and Projected Expenditure Growth ........................................................................97
Stadium Reserve .....................................................................................................................98
78
Minnesota Economic Forecast Summary

Forecast 2022 to 2027 - Calendar Years
2022 2023 2024 2025 2026 2027

Current Dollar Income (Billions of Dollars)
Personal Income 385.606 405.118 425.488 447.478 469.108 490.940
%Chg 1.8 5.1 5.0 5.2 4.8 4.7
Wage & Salary Disbursements 205.456 214.643 225.165 237.778 249.600 260.813
%Chg 6.9 4.5 4.9 5.6 5.0 4.5
Non-Wage Personal Income 180.147 190.473 200.320 209.700 219.508 230.128
%Chg -3.4 5.7 5.2 4.7 4.7 4.8
Supplements to Wages & Salaries 43.426 45.710 48.087 50.867 53.468 55.828
%Chg 3.9 5.3 5.2 5.8 5.1 4.4
Dividends, Interest, & Rent Income 73.117 79.475 84.292 87.874 91.514 95.545
%Chg 4.9 8.7 6.1 4.2 4.1 4.4
Farm Proprietors Income 5.098 5.565 5.552 5.529 5.476 5.444
%Chg 55.1 9.2 -0.2 -0.4 -1.0 -0.6
Non-Farm Proprietors Income 25.088 25.259 25.307 25.679 26.752 27.828
%Chg 1.3 0.7 0.2 1.5 4.2 4.0
Personal Current Transfer Receipts 66.103 68.596 72.753 77.264 81.517 86.081
%Chg -15.2 3.8 6.1 6.2 5.5 5.6
Less: Contrib. for Gov. Social Ins. 31.057 32.499 34.036 35.882 37.586 38.969
%Chg 5.8 4.6 4.7 5.4 4.8 3.7
Real Income (Billions of 2009 Dollars)
Real Personal Income 313.780 318.778 327.255 337.123 346.585 355.505
%Chg -4.3 1.6 2.7 3.0 2.8 2.6
Real Wage & Salary Disbursements 167.190 168.903 173.180 179.135 184.408 188.863
%Chg 0.6 1.0 2.5 3.4 2.9 2.4
Employment (Thousands)
Employment - Total Non-Farm Payrolls 2,938.3 2,948.1 2,949.5 2,971.1 2,983.0 2,992.2
%Chg 3.1 0.3 0.0 0.7 0.4 0.3
Construction 130.6 126.6 124.8 124.7 125.0 125.5
%Chg 0.6 -3.1 -1.4 -0.1 0.3 0.3
Manufacturing 328.2 329.8 330.1 334.1 338.2 341.6
%Chg 4.6 0.5 0.1 1.2 1.2 1.0
Private Service-Providing 2,065.0 2,071.1 2,070.1 2,084.6 2,089.2 2,091.9
%Chg 3.5 0.3 0.0 0.7 0.2 0.1
Government 408.1 414.5 418.4 421.7 424.5 427.2
%Chg 0.9 1.6 0.9 0.8 0.7 0.6
Minnesota Civilian Labor Force 3,087.8 3,141.0 3,170.7 3,184.9 3,194.5 3,202.3
Unemployment Rate (%) 2.3 3.5 4.0 3.5 3.3 3.1
Demographic Indicators (Millions)
Total Population 5.716 5.736 5.763 5.790 5.817 5.844
%Chg 0.1 0.4 0.5 0.5 0.5 0.5
Total Population Age 16 & Over 4.566 4.596 4.629 4.663 4.696 4.728
%Chg 0.4 0.6 0.7 0.7 0.7 0.7
Total Population Age 65 & Over 0.098 0.101 0.105 0.108 0.111 0.113
%Chg 2.6 3.2 3.2 2.9 2.6 2.3
Total Households 2.300 2.316 2.338 2.360 2.382 2.404
%Chg 0.7 0.7 0.9 0.9 0.9 0.9
Housing Indicators (Thousands)
Total Housing Permits (Authorized) 30.786 22.090 24.061 25.981 25.650 25.372
%Chg -14.2 -28.2 8.9 8.0 -1.3 -1.1
Single-Family 14.167 12.605 14.763 15.798 15.445 15.170
%Chg -23.5 -11.0 17.1 7.0 -2.2 -1.8
Source: Minnesota Management & Budget (MMB) November 2022 Forecast
79
U.S. Economic Forecast Summary

2022 2023 2024 2025 2026 2027

Real National Income Accounts (Billions of 2009 Dollars)
Real Gross Domestic Product (GDP) 19,960.3 19,928.2 20,194.0 20,562.0 20,950.2 21,320.0
%Chg 1.8 -0.2 1.3 1.8 1.9 1.8
Real Consumption 14,119.9 14,228.0 14,385.3 14,631.5 14,913.2 15,222.5
%Chg 2.7 0.8 1.1 1.7 1.9 2.1
Real Nonresidential Fixed Investment 2,927.1 2,884.2 2,879.1 2,911.8 2,961.2 3,021.6
%Chg 3.2 -1.5 -0.2 1.1 1.7 2.0
Real Residential Investment 644.3 543.1 575.6 618.6 633.6 637.1
%Chg -10.4 -15.7 6.0 7.5 2.4 0.5
Real Personal Income 17,727.6 17,940.8 18,305.0 18,740.9 19,196.8 19,680.6
%Chg -3.8 1.2 2.0 2.4 2.4 2.5
Current Dollar National Income Accounts (Billions of Dollars)
Gross Domestic Product (GDP) 25,401.9 26,398.3 27,373.0 28,448.2 29,603.3 30,799.4
%Chg 9.0 3.9 3.7 3.9 4.1 4.0
Personal Income 21,787.0 22,799.8 23,799.2 24,875.4 25,982.9 27,178.0
%Chg 2.3 4.6 4.4 4.5 4.5 4.6
Wage & Salary Disbursements 11,199.4 11,649.8 12,131.0 12,720.7 13,286.5 13,865.0
%Chg 8.8 4.0 4.1 4.9 4.4 4.4
Non-Wage Personal Income 10,587.6 11,150.0 11,668.2 12,154.7 12,696.5 13,313.1
%Chg -3.8 5.3 4.6 4.2 4.5 4.9
Price and Wage Indexes
U.S. GDP Deflator (2005=1.0) 127.272 132.465 135.547 138.349 141.299 144.458
%Chg 7.0 4.1 2.3 2.1 2.1 2.2
U.S. Consumer Price Index (1982-84=1.0) 2.930 3.055 3.138 3.210 3.280 3.353
%Chg 8.1 4.3 2.7 2.3 2.2 2.2
Employment Cost Index (Dec 2005=1.0) 1.530 1.602 1.673 1.743 1.812 1.877
%Chg 5.2 4.7 4.4 4.2 4.0 3.6
Employment (Thousands)
Employment - Total Non-Farm Payrolls 152.0 152.0 151.5 152.5 153.2 153.9
%Chg 4.1 0.0 -0.3 0.7 0.5 0.4
Construction 7.7 7.5 7.4 7.3 7.4 7.4
%Chg 3.4 -2.0 -2.1 -0.2 0.6 0.7
Manufacturing 12.8 12.7 12.2 12.1 12.0 11.9
%Chg 3.7 -1.0 -3.7 -1.1 -1.0 -0.3
Private Service-Providing 108.7 108.6 108.5 109.5 110.1 110.6
%Chg 4.7 0.0 -0.1 0.9 0.6 0.4
Government 22.3 22.6 22.8 22.9 23.1 23.2
%Chg 1.2 1.3 0.9 0.7 0.6 0.6
U.S. Civilian Labor Force 164.4 165.5 166.1 166.7 167.2 167.7
Employment - Household Survey 158.3 157.4 157.4 158.7 159.6 160.3
Unemployment Rate (%) 3.7 4.9 5.3 4.8 4.6 4.4
Other Key Measures
Non-Farm Productivity (index, 2005=1.0) 1.132 1.132 1.150 1.161 1.178 1.195
%Chg -1.7 0.0 1.5 1.0 1.4 1.4
Total Ind. Production (index, 2007=100) 104.251 103.703 104.221 105.840 107.538 109.028
%Chg 4.3 -0.5 0.5 1.6 1.6 1.4
Manhours in Private Non-Farm Estab.
Billions of Hours 217.9 215.8 215.0 217.1 218.6 219.8
%Chg 3.8 -0.9 -0.4 1.0 0.7 0.5
Average Weekly Hours 33.0 32.9 32.9 33.0 33.1 33.1
Manufacturing Workweek 41.2 40.7 40.8 40.8 40.7 40.7
Source: IHS Economics; November 2022 Baseline
80
Alternative Forecast Comparison

Calendar Years
22Q3 22Q4 23Q1 23Q2 23Q3 23Q4 2021 2022 2023 2024
Real Gross Domestic Product (GDP), Percent Change, Seasonally Adjusted at Annual Rate
Blue Chip Consensus (02-22) 2.6 0.4 -0.6 -0.3 0.4 0.9 5.9 1.8 0.2 **
IHS Economics Baseline (02-22) 2.6 -0.4 -2.0 -0.4 1.0 1.6 5.9 1.8 -0.2 1.3
Moody's Analytics (02-22) 2.6 -0.1 0.1 0.4 1.9 ** 5.9 1.8 0.7 **
Wells Fargo (02-22) 2.6 1.1 0.7 0.1 -2.5 -3.2 5.9 1.9 0.1 -0.2
CBO Outlook (07-21) 3.7 2.9 2.2 2.5 2.1 1.5 5.7 3.8 2.8 1.6
Consumer Price Index (CPI), Percent Change, Seasonally Adjusted at Annual Rate (except where noted)
Blue Chip Consensus (02-22) 5.7 4.9 4.0 3.0 2.8 2.5 4.7 8.1 4.2 **
IHS Economics Baseline (02-22) 8.3 7.7 6.3 4.2 3.6 3.0 4.7 8.1 4.3 2.7
Moody's Analytics (02-22) 5.7 4.0 3.6 3.1 2.5 ** 4.7 8.1 4.0 **
Wells Fargo (11-20) * 8.3 7.4 6.0 4.2 3.4 3.1 4.7 8.1 4.1 2.7
CBO Outlook (07-21) 3.6 3.3 3.0 2.7 2.5 2.4 4.7 6.1 3.1 2.4
* Year-over-Year Percent Change
**Not Available
IHS Economics Baseline Forecast Comparison

Calendar Years
2020 2021 2022 2023 2024 2025 2026 2027

Real Gross Domestic Product (GDP), Annual Percent Change
February 2019 2.0 1.7 1.6 1.4 - -
November 2019 2.1 2.0 1.6 1.5 - -
February 2020 2.1 2.0 1.7 1.5 - -
April 2020 -5.4 6.3 4.0 1.6 - -
November 2020 -3.6 3.1 2.5 2.5 2.9 3.0
February 2021 -3.5 5.7 4.1 2.3 2.6 2.6
November 2021 -3.4 5.5 4.3 2.9 2.7 2.6
February 2022 -3.4 5.7 3.7 2.7 2.6 2.5
November 2022 -2.8 5.9 1.8 -0.2 1.3 1.8 1.9 1.8
Consumer Price Index (CPI), Annual Percent Change
February 2019 2.1 2.3 2.4 2.4 - -
November 2019 1.9 1.8 2.5 2.5 - -
February 2020 1.8 1.7 2.2 2.5 - -
April 2020 0.7 2.1 2.7 2.7 - -
November 2020 1.3 2.3 2.6 2.2 2.1 2.2
February 2021 1.3 2.1 2.1 2.0 2.1 2.2
November 2021 1.2 4.5 3.3 2.1 2.2 2.2
February 2022 1.3 4.7 4.5 1.9 2.1 2.1
November 2022 1.2 4.7 8.1 4.3 2.7 2.3 2.2 2.2
Source: IHS Economics
81
Forecast Comparison: Minnesota & U.S.

2020 2021 2022 2023 2024 2025 2026 2027

Personal Income (Billions of Current Dollars)
Minnesota
November 2022 355.2 378.8 385.6 405.1 425.5 447.5 469.1 490.9
%Chg 6.7 6.6 1.8 5.1 5.0 5.2 4.8 4.7
February 2022 350.8 375.1 379.6 397.2 415.9 435.3
%Chg 6.5 6.9 1.2 4.6 4.7 4.7
U.S.
November 2022 19,832 21,295 21,787 22,800 23,799 24,875 25,983 27,178
%Chg 6.7 7.4 2.3 4.6 4.4 4.5 4.5 4.6
February 2022 19,628 21,060 21,495 22,603 23,756 24,973
%Chg 6.5 7.3 2.1 5.2 5.1 5.1
Wage and Salary Disbursements (Billions of Current Dollars)
Minnesota
November 2022 179.4 192.2 205.5 214.6 225.2 237.8 249.6 260.8
%Chg 0.1 7.2 6.9 4.5 4.9 5.6 5.0 4.5
February 2022 179.1 194.1 210.1 221.0 231.3 241.5
%Chg 0.0 8.4 8.2 5.2 4.6 4.4
U.S.
November 2022 9,457 10,290 11,199 11,650 12,131 12,721 13,286 13,865
%Chg 1.4 8.8 8.8 4.0 4.1 4.9 4.4 4.4
February 2022 9,444 10,306 11,276 11,928 12,511 13,111
%Chg 1.3 9.1 9.4 5.8 4.9 4.8
Total Non-Farm Payroll Employment (Thousands)
Minnesota
November 2022 2,784 2,849 2,938 2,948 2,949 2,971 2,983 2,992
%Chg -6.7 2.3 3.1 0.3 0.0 0.7 0.4 0.3
February 2022 2,791 2,846 2,942 2,987 3,015 3,036
%Chg -6.6 2.0 3.4 1.5 0.9 0.7
U.S.
November 2022 142,146 146,102 152,021 152,012 151,487 152,525 153,226 153,864
%Chg -5.8 2.8 4.1 0.0 -0.3 0.7 0.5 0.4
February 2022 142,146 146,096 151,541 153,894 155,108 156,017
%Chg -5.8 2.8 3.7 1.6 0.8 0.6
Average Annual Non-Farm Wage (Current Dollars)
Minnesota
November 2022 64,416 67,464 69,923 72,808 76,341 80,031 83,676 87,165
%Chg 7.3 4.7 3.6 4.1 4.9 4.8 4.6 4.2
February 2022 64,189 68,226 71,387 73,990 76,703 79,546
%Chg 7.1 6.3 4.6 3.6 3.7 3.7
U.S.
November 2022 66,533 70,431 73,670 76,637 80,080 83,401 86,711 90,112
%Chg 7.7 5.9 4.6 4.0 4.5 4.1 4.0 3.9
February 2022 66,440 70,546 74,409 77,506 80,659 84,034
%Chg 7.5 6.2 5.5 4.2 4.1 4.2
Source: IHS Economics and Minnesota Management and Budget (MMB)
82
Factors Affecting Tax Revenue

Billions of Current Dollars
2022 2023 2024 2025 2026 2027
Individual Income Tax (Calendar Year)
Minnesota Non-Farm Tax Base
April 2020 279.6 289.6
%Chg 5.9 3.6
November 2020 284.06 295.875 310.85 325.625
%Chg 4.4 4.2 5.1 4.8
February 2021 289.0 301.4775 314.755 329.365
%Chg 4.3 4.3 4.4 4.6
November 2021 302.010 318.900 335.453 352.298
%Chg 6.8 5.6 5.2 5.0
February 2022 305.088 320.878 336.385 351.933
%Chg 7.3 5.2 4.8 4.6
November 2022 303.662 319.375 334.763 351.330 367.868 384.188
%Chg 5.9 5.2 4.8 4.9 4.7 4.4
Minnesota Wage and Salary Disbursements
April 2020 183.69 192.7125
%Chg 8.8 4.9
November 2020 195.29 203.705 213.76 223.398
%Chg 5.2 4.3 4.9 4.5
February 2021 197.785 206.6925 215.5975 225.518
%Chg 5.0 4.5 4.3 4.6
November 2021 207.565 219.910 231.063 242.383
%Chg 7.3 5.9 5.1 4.9
February 2022 210.050 221.035 231.293 241.530
%Chg 8.2 5.2 4.6 4.4
November 2022 205.456 214.643 225.165 237.778 249.600 260.813
%Chg 6.9 4.5 4.9 5.6 5.0 4.5
Minnesota Dividends, Interest, & Rental Income
April 2020 74.023 75.260
%Chg 3.0 1.7
November 2020 64.796 66.811 69.615 72.903
%Chg 1.7 3.1 4.2 4.7
February 2021 66.764 69.156 72.153 75.574
%Chg 2.8 3.6 4.3 4.7
November 2021 67.217 70.184 73.788 77.933
%Chg 4.8 4.4 5.1 5.6
February 2022 67.625 71.344 75.139 79.039
%Chg 5.4 5.5 5.3 5.2
November 2022 73.117 79.475 84.292 87.874 91.514 95.545
%Chg 4.9 8.7 6.1 4.2 4.1 4.4
Minnesota Non-Farm Proprietors' Income
April 2020 21.850 21.670
%Chg -5.9 -0.8
November 2020 23.973 25.360 27.473 29.325
%Chg 5.0 5.8 8.3 6.7
February 2021 24.402 25.632 27.003 28.273
%Chg 2.6 5.0 5.3 4.7
November 2021 27.231 28.806 30.600 31.983
%Chg 7.5 5.8 6.2 4.5
February 2022 27.414 28.497 29.951 31.361
%Chg 5.8 4.0 5.1 4.7
November 2022 25.088 25.259 25.307 25.679 26.752 27.828
%Chg 1.3 0.7 0.2 1.5 4.2 4.0
83
Factors Affecting Tax Revenue (Continued)

2022 2023 2024 2025 2026 2027
General Sales Tax (Fiscal Year)
Minnesota Synthetic Sales Tax Base
April 2020 92.196 94.886
%Chg 12.0 2.9
November 2020 98.570 102.488 106.441 110.718
%Chg 3.6 4.0 3.9 4.0
February 2021 101.985 106.344 110.864 115.735
%Chg 6.0 4.3 4.3 4.4
November 2021 110.969 114.138 117.784 122.392
%Chg 10.8 2.9 3.2 3.9
February 2022 111.904 115.627 118.788 122.437
%Chg 11.7 3.3 2.7 3.1
November 2022 113.912 118.719 119.106 123.024 127.307 131.659
%Chg 12.8 4.2 0.3 3.3 3.5 3.4
*Historical data revised as a result of comprehensive GDP account revisions
Minnesota's Proxy Share of U.S. Consumer Durable Spending (Excluding Autos)
April 2020 16.964 17.335
%Chg 6.5 2.2
November 2020 19.753 19.914 20.130 20.404
%Chg -1.2 0.8 1.1 1.4
February 2021 20.439 20.652 21.027 21.446
%Chg -1.8 1.0 1.8 2.0
November 2021 23.314 22.312 22.025 22.390
%Chg 7.1 -4.3 -1.3 1.7
February 2022 23.649 22.954 22.814 22.950
%Chg 8.6 -2.9 -0.6 0.6
November 2022 24.998 25.411 25.127 25.567 26.169 26.792
%Chg 10.2 1.7 -1.1 1.8 2.4 2.4
Minnesota's Proxy Share of U.S. Capital Equipment Spending
April 2020 12.278 11.941
%Chg 10.8 -2.7
November 2020 13.659 14.021 14.316 15.221
%Chg 0.1 2.7 2.1 6.3
February 2021 15.783 16.353 16.676 17.589
%Chg 13.1 3.6 2.0 5.5
November 2021 14.694 15.469 15.992 16.666
%Chg 5.5 5.3 3.4 4.2
February 2022 15.069 15.671 16.110 16.686
%Chg 7.9 4.0 2.8 3.6
November 2022 13.839 14.179 13.497 13.654 14.227 14.786
%Chg 7.9 2.5 -4.8 1.2 4.2 3.9
Minnesota's Proxy Share of U.S. Construction Spending
April 2020 8.597 9.080
%Chg 12.5 5.6
November 2020 9.139 9.674 10.230 10.786
%Chg 2.2 5.9 5.7 5.4
February 2022 9.416 9.284 9.887 10.584
%Chg -0.8 -1.4 6.5 7.0
November 2021 10.377 10.841 11.258 11.797
%Chg 8.5 4.5 3.9 4.8
February 2022 10.766 11.257 11.555 12.089
%Chg 12.0 4.6 2.6 4.6
November 2022 10.933 10.463 10.764 11.740 12.444 12.960
%Chg 9.1 -4.3 2.9 9.1 6.0 4.1
84
Factors Affecting Tax Revenue (Continued)

2022 2023 2024 2025 2026 2027

Corporate Franchise Tax (Calendar Year)
U.S. Corporate Profits (w/ IVA and capital consumption adjustment)
April 2020 1,965.382 2,037.580
%Chg 3.0 3.7
November 2020 1,951.848 2,069.899 2,222.5 2,379.8 2,379.8 2,379.8
%Chg 6.4 6.0 7.4 7.1 7.1 7.1
February 2021 2,100.317 2,190.659 2,319.2 2,439.9 2,439.9 2,439.9
%Chg -1.5 4.3 5.9 5.2 5.2 5.2
November 2021 2,779.373 2,875.201 3,085.9 3,284.7 3,284.7 3,284.7
%Chg -2.9 3.4 7.3 6.4 6.4 6.4
February 2022 2,793.825 2,787.388 2,925.9 3,069.8 3,223.3 3,371.3
%Chg -4.8 -0.2 5.0 4.9 5.0 4.6
November 2022 3,068.713 2,895.524 2,901.3 2,926.9 3,023.8 3,146.4
%Chg 5.3 -5.6 0.2 0.9 3.3 4.1
Deed & Mortgage Tax (Fiscal Year)
U.S. New and Existing Home Sales (Current $ Value)
November 2020 2,178.5 2,168.0 2,170.0 2,211.4
%Chg -1.4 -0.5 0.1 1.9
February 2021 2,319.2 2,251.4 2,222.4 2,260.3
%Chg 1.1 -2.9 -1.3 1.7
November 2021 2,393.1 2,338.1 2,326.3 2,362.5
%Chg 3.5 -2.3 -0.5 1.6
February 2022 2,459.2 2,410.7 2,359.9 2,395.1
%Chg 6.3 -2.0 -2.1 1.5
November 2022 2,394.0 1,716.8 1,575.8 1,860.5 2,086.1 2,400.4
%Chg 3.6 -28.3 -8.2 18.1 12.1 15.1
85
COMPARISON OF ACTUAL AND ESTIMATED

NON-RESTRICTED REVENUES
October YTD, 2022-FY2023
($ IN THOUSANDS)
FORECAST ACTUAL VARIANCE ACT-

REVENUES REVENUES FCST
Individual Income Tax
Withholding 3,621,300 3,525,565 (95,735)
Declarations 432,642 522,807 90,164
Miscellaneous 260,388 361,623 101,235
Partnership & S Corporation Gross 496,480 518,470 21,990
Gross 4,810,811 4,928,465 117,654
Partnership & S Corporation Refunds 16,095 49,832 33,737
Individual, Fiduciary, & Withholding Refunds 121,855 146,998 25,143
Total Refunds 137,949 196,830 58,881
Net Income Tax 4,672,861 4,731,635 58,774
Corporate Franchise Tax

Declarations 624,531 740,789 116,258
Miscellaneous 72,704 47,288 (25,416)
Gross 697,235 788,077 90,842
Refund 33,416 31,023 (2,393)
Net 663,819 757,053 93,234
General Sales and Use Tax

Gross 2,617,045 2,798,350 181,305
Mpls. sales tax transferred to MSFA - -
MPLS Sales Tax w/Holding for NFL Stadium 7,235 7,236 1
Sales Tax Gross 2,624,280 2,805,585 181,306
Refunds (including Indian refunds) 48,357 27,799 (20,558)
Net 2,575,923 2,777,786 201,863
Other Revenues:
Net Estate 71,800 100,908 29,108
Net Liquor/Wine/Beer 29,906 30,178 272
Net Cigarette/Tobacco 159,937 139,059 (20,878)
Deed and Mortgage 115,482 97,129 (18,353)
Net Insurance Premiums Taxes 117,476 120,254 2,777
Net Lawful Gambling 49,644 51,360 1,716
Health Care Surcharge 67,643 24,689 (42,954)
Other Taxes (1) 3 4
Statewide Property Tax 179,848 167,681 (12,167)
DHS SOS Collections 29,950 38,005 8,055
Investment Income 9,231 61,291 52,060
Tobacco Settlement 100 - (100)
Dept. Earnings & MSOP Recov. 53,463 58,257 4,794
Fines and Surcharges 12,047 18,469 6,422
Lottery Revenues 15,110 19,174 4,064
Revenues yet to be allocated - 17,919 17,919
Residual Revenues 27,749 55,447 27,699
Other Subtotal 939,385 999,823 60,438
Other Refunds 1,734 1,047 (687)
Other Net 937,650 998,776 61,125
Total Gross 9,071,710 9,521,949 450,240

Total Refunds 221,456 256,699 35,243
Total Net 8,850,253 9,265,250 414,997
86
FY 2022 Actual vs EOS

($ in thousands)
EOS Actual $
FY 2022 FY 2022 Change
Actual & Estimated Resources
Balance Forward From Prior Year 7,025,957 7,025,957 0
Current Resources:
Tax Revenues 26,552,098 29,390,413 2,838,315
Non-Tax Revenues 850,481 926,552 76,071
Subtotal - Non-Dedicated Revenue 27,402,579 30,316,965 2,914,386
Dedicated Revenue 5 4 -1
Transfers In 176,896 179,721 2,825
Prior Year Adjustments 71,378 132,779 61,401
Subtotal - Other Revenue 248,279 312,504 64,225
Subtotal-Current Resources 27,650,858 30,629,469 2,978,611
Total Resources Available 34,676,815 37,655,426 2,978,611
Actual & Estimated Spending

E-12 Education 10,077,280 9,960,012 -117,268
Higher Education 1,756,101 1,750,216 -5,885
Property Tax Aids & Credits 2,575,125 2,052,912 -522,213
Health & Human Services 7,039,452 6,922,572 -116,880
Public Safety & Judiciary 1,353,431 1,292,489 -60,942
Transportation 327,502 236,332 -91,170
Environment 207,950 195,128 -12,822
Economic Development, Energy, Ag and Housing 960,957 841,841 -119,116
State Government & Veterans 921,986 665,137 -256,849
Debt Service 592,426 592,426 0
Capital Projects & Grants 186,482 177,361 -9,121
Estimated Cancellations -5,000 0 5,000
Total Expenditures & Transfers 25,993,692 24,686,426 -1,307,266
Balance Before Reserves 8,683,123 12,969,000 4,285,877
Cash Flow Account 350,000 350,000 0
Budget Reserve 2,655,745 2,672,484 16,739
Stadium Reserve 212,600 229,397 16,797
Appropriations Carried Forward 0 972,828 972,828
Budgetary Balance 5,464,778 8,744,291 3,279,513
87
FY 2022-23 Current Biennium

($ in thousands)
Nov Nov Biennial Total

FY 2022 FY 2023 FY 2022-23
Balance Forward From Prior Year 7,025,957 12,969,000 7,025,957
Current Resources:
Tax Revenues 29,390,413 27,912,767 57,303,180
Non-Tax Revenues 926,552 1,188,969 2,115,521
Dedicated Revenue 4 5 9
Transfers In 179,721 159,495 339,216

E-12 Education 9,960,012 10,263,374 20,223,386
Higher Education 1,750,216 1,784,338 3,534,554
Property Tax Aids & Credits 2,052,912 2,595,688 4,648,600
Health & Human Services 6,922,572 8,311,081 15,233,653
Public Safety & Judiciary 1,292,489 1,378,566 2,671,055
Transportation 236,332 245,137 481,469
Environment 195,128 207,884 403,012
Economic Development, Energy, Ag and Housing 841,841 443,281 1,285,122
State Government & Veterans 665,137 1,155,955 1,821,092
Debt Service 592,426 547,759 1,140,185
Capital Projects & Grants 177,361 174,083 351,444
Estimated Cancellations 0 -15,000 -15,000
Total Expenditures & Transfers 24,686,426 27,092,146 51,778,572
Cash Flow Account 350,000 350,000 350,000
Budget Reserve 2,672,484 2,852,098 2,852,098
Stadium Reserve 229,397 368,060 368,060
88
FY 2022-23 Current Biennium

November 2022 Forecast vs End of 2022 Legislative Session
($ in thousands)
EOS Nov $
FY 2022-23 FY 2022-23 Change
Balance Forward From Prior Year 7,025,957 7,025,957 0
Current Resources:
Tax Revenues 54,594,416 57,303,180 2,708,764
Non-Tax Revenues 1,625,972 2,115,521 489,549
Dedicated Revenue 10 9 -1
Transfers In 326,081 339,216 13,135

E-12 Education 20,502,935 20,223,386 -279,549
Higher Education 3,531,718 3,534,554 2,836
Health & Human Services 16,337,467 15,233,653 -1,103,814
Transportation 477,224 481,469 4,245
Environment 403,427 403,012 -415
Economic Development, Energy, Ag and Housing 1,292,744 1,285,122 -7,622
State Government & Veterans 1,889,712 1,821,092 -68,620
Debt Service 1,183,167 1,140,185 -42,982
Estimated Cancellations -20,000 -15,000 5,000
Total Expenditures & Transfers 53,299,112 51,778,572 -1,520,540
Budget Reserve 2,655,745 2,852,098 196,353
Stadium Reserve 326,761 368,060 41,299
89
FY 2024-25 Planning Estimates

($ in thousands)

FY 2024 FY 2025 FY 2024-25
Current Resources:
Tax Revenues 28,457,458 29,360,276 57,817,734
Non-Tax Revenues 1,309,204 957,062 2,266,266
Transfers In 96,401 25,808 122,209

E-12 Education 10,595,630 10,656,321 21,251,951
Transportation 135,730 135,730 271,460
Environment 179,668 179,497 359,165
Economic Development, Energy, Ag and Housing 333,030 307,080 640,110
State Government & Veterans 639,634 860,464 1,500,098
Debt Service 559,960 586,797 1,146,757
Estimated Cancellations -5,000 -15,000 -20,000
Budget Reserve 2,852,098 2,852,098 2,852,098
Stadium Reserve 520,964 684,265 684,265
90

November 2022 Forecast vs End of 2022 Legislative Session
($ in thousands)
EOS Nov $
FY 2024-25 FY 2024-25 Change
Current Resources:
Tax Revenues 58,105,887 57,817,734 -288,153
Non-Tax Revenues 1,564,829 2,266,266 701,437
Subtotal - Non-Dedicated Revenue 59,670,716 60,084,000 413,284
Transfers In 125,803 122,209 -3,594
Prior Year Adjustments 74,088 74,405 317
Subtotal - Other Revenue 199,901 196,624 -3,277
Subtotal-Current Resources 59,870,617 60,280,624 410,007

E-12 Education 21,242,499 21,251,951 9,452
Higher Education 3,505,828 3,505,828 0
Property Tax Aids & Credits 4,342,805 4,472,595 129,790
Health & Human Services 18,533,104 17,811,341 -721,763
Transportation 271,460 271,460 0
Environment 357,639 359,165 1,526
Economic Development, Energy, Ag and Housing 640,837 640,110 -727
State Government & Veterans 1,497,415 1,500,098 2,683
Debt Service 1,148,829 1,146,757 -2,072
Estimated Cancellations -20,000 -20,000 0
Total Expenditures & Transfers 54,553,469 53,953,161 -600,308
Budget Reserve 2,655,745 2,852,098 196,353
Stadium Reserve 581,221 684,265 103,044
91
Biennial Comparison
($ in thousands)
Nov Nov $
FY 2022-23 FY 2024-25 Change
Current Resources:
Tax Revenues 57,303,180 57,817,734 514,554
Non-Tax Revenues 2,115,521 2,266,266 150,745
Subtotal - Non-Dedicated Revenue 59,418,701 60,084,000 665,299
Transfers In 339,216 122,209 -217,007
Prior Year Adjustments 170,029 74,405 -95,624
Subtotal-Current Resources 59,927,955 60,280,624 352,669

E-12 Education 20,223,386 21,251,951 1,028,565
Higher Education 3,534,554 3,505,828 -28,726
Public Safety & Judiciary 2,671,055 2,676,504 5,449
Transportation 481,469 271,460 -210,009
Environment 403,012 359,165 -43,847
Economic Development, Energy, Ag and Housing 1,285,122 640,110 -645,012
Debt Service 1,140,185 1,146,757 6,572
Budget Reserve 2,852,098 2,852,098 0
Stadium Reserve 368,060 684,265 316,205
92

($ in thousands)

FY 2026 FY 2027 FY 2026-27
Current Resources:
Tax Revenues 30,704,782 32,118,219 62,823,001
Non-Tax Revenues 819,753 822,242 1,641,995
Transfers In 25,776 25,972 51,748

E-12 Education 10,692,108 10,767,227 21,459,335
Transportation 135,730 135,730 271,460
Environment 179,263 179,098 358,361
Economic Development, Energy, Ag and Housing 287,914 287,914 575,828
State Government & Veterans 639,065 631,420 1,270,485
Debt Service 615,311 641,985 1,257,296
Budget Reserve 2,852,098 2,852,098 2,852,098
Stadium Reserve 854,101 1,030,809 1,030,809
93
Biennial Comparison
($ in thousands)
Nov Nov $
FY 2024-25 FY 2026-27 Change
Current Resources:
Tax Revenues 57,817,734 62,823,001 5,005,267
Non-Tax Revenues 2,266,266 1,641,995 -624,271
Transfers In 122,209 51,748 -70,461
Prior Year Adjustments 74,405 74,236 -169

E-12 Education 21,251,951 21,459,335 207,384
Higher Education 3,505,828 3,505,828 0
Property Tax Aids & Credits 4,472,595 4,591,540 118,945
Transportation 271,460 271,460 0
Environment 359,165 358,361 -804
Economic Development, Energy, Ag and Housing 640,110 575,828 -64,282
Debt Service 1,146,757 1,257,296 110,539
Estimated Cancellations -20,000 -20,000 0
Budget Reserve 2,852,098 2,852,098 0
Stadium Reserve 684,265 1,030,809 346,544
94
FY 2022-27 Planning Horizon

($ in thousands)
Nov Nov Nov

FY 2022-23 FY 2024-25 FY 2026-27
Current Resources:
Tax Revenues 57,303,180 57,817,734 62,823,001
Non-Tax Revenues 2,115,521 2,266,266 1,641,995
Transfers In 339,216 122,209 51,748

E-12 Education 20,223,386 21,251,951 21,459,335
Transportation 481,469 271,460 271,460
Environment 403,012 359,165 358,361
Economic Development, Energy, Ag and Housing 1,285,122 640,110 575,828
State Government & Veterans 1,821,092 1,500,098 1,270,485
Debt Service 1,140,185 1,146,757 1,257,296
Budget Reserve 2,852,098 2,852,098 2,852,098
Stadium Reserve 368,060 684,265 1,030,809
95
Historical and Projected Revenue Growth

November 2022 Forecast - General Fund
($ in millions)
Actual Actual Nov Nov Est Est Pling Pling Average

FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Annual
Individual Income Tax $12,135 $14,233 $16,873 $15,086 $15,812 $16,353 $17,319 $18,321
$ change (309) 2,097 2,640 (1,786) 725 542 965 1,003
% change -2.5% 17.3% 18.6% -10.6% 4.8% 3.4% 5.9% 5.8% 4.1%
Sales Tax $5,746 $6,169 $6,644 $7,448 $7,447 $7,709 $7,970 $8,235
$ change (17) 424 474 805 (2) 262 262 265
% change -0.3% 7.4% 7.7% 12.1% 0.0% 3.5% 3.4% 3.3% 4.4%
Corporate Tax $1,539 $2,258 $2,823 $2,360 $2,232 $2,254 $2,298 $2,347
$ change (82) 719 564 (463) (128) 21 44 49
% change -5.1% 46.7% 25.0% -16.4% -5.4% 0.9% 2.0% 2.1% 7.6%
Statewide Property Tax $753 $803 $774 $760 $747 $745 $745 $745
$ change (57) 50 (29) (14) (13) (2) 0 0
% change -7.1% 6.6% -3.6% -1.9% -1.7% -0.2% 0.0% 0.0% -1.1%
Other Tax Revenue $1,904 $2,197 $2,277 $2,258 $2,220 $2,299 $2,373 $2,469
$ change (58) 293 80 (19) (39) 80 73 96
% change -2.9% 15.4% 3.6% -0.8% -1.7% 3.6% 3.2% 4.1% 2.5%
Total Tax Revenue $22,077 $25,660 $29,390 $27,913 $28,457 $29,360 $30,705 $32,118
$ change (522) 3,583 3,730 (1,478) 545 903 1,345 1,413
% change -2.3% 16.2% 14.5% -5.0% 2.0% 3.2% 4.6% 4.6% 4.1%
Non-Tax Revenues $817 $922 $927 $1,189 $1,309 $957 $820 $822
$ change (62) 105 5 262 120 (352) (137) 2
% change -7.0% 12.8% 0.5% 28.3% 10.1% -26.9% -14.3% 0.3% 2.0%
Transfers, All Other $256 $746 $313 $197 $134 $63 $63 $63
$ change (8) 490 (434) (116) (63) (71) (0) 0
% change -3.0% 191.4% -58.1% -37.0% -32.1% -52.9% -0.1% 0.3% -15.2%
Total Revenue $23,150 $27,329 $30,629 $29,298 $29,900 $30,380 $31,587 $33,004
$ change (592) 4,178 3,301 (1,331) 602 480 1,207 1,416
% change -2.5% 18.0% 12.1% -4.3% 2.1% 1.6% 4.0% 4.5% 3.9%
96
Historical and Projected Spending Growth

November 2022 Forecast - General Fund
($ in millions)
Actual Actual Nov Nov Est Est Pling Pling Average

FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027 Annual
E-12 Education $9,836 $9,919 $9,960 $10,263 $10,596 $10,656 $10,692 $10,767
$ change 248 83 41 303 332 61 36 75
% change 2.6% 0.8% 0.4% 3.0% 3.2% 0.6% 0.3% 0.7% 1.8%
Higher Education $1,693 $1,714 $1,750 $1,784 $1,753 $1,753 $1,753 $1,753
$ change 51 21 36 34 (31) - - -
% change 3.1% 1.2% 2.1% 1.9% -1.8% 0.0% 0.0% 0.0% 0.8%
Prop. Tax Aids & Credits $1,867 $2,026 $2,053 $2,596 $2,210 $2,263 $2,286 $2,306
$ change (60) 159 27 543 (386) 53 23 20
% change -3.1% 8.5% 1.3% 26.4% -14.9% 2.4% 1.0% 0.9% 3.5%
Health & Human Services $7,035 $6,611 $6,923 $8,311 $8,655 $9,157 $9,791 $10,090
$ change 359 (424) 312 1,389 344 502 634 300
% change 5.4% -6.0% 4.7% 20.1% 4.1% 5.8% 6.9% 3.1% 4.1%
Public Safety & Judiciary $1,237 $1,314 $1,292 $1,379 $1,338 $1,338 $1,332 $1,332
$ change 11 77 (21) 86 (40) (0) (6) -
% change 0.9% 6.2% -1.6% 6.7% -2.9% 0.0% -0.4% 0.0% 2.5%
Debt Service $540 $516 $592 $548 $560 $587 $615 $642
$ change (10) (25) 77 (45) 12 27 29 27
% change -1.8% -4.5% 14.9% -7.5% 2.2% 4.8% 4.9% 4.3% 0.5%
All Other $1,570 $1,547 $2,116 $2,211 $1,450 $1,638 $1,409 $1,393
$ change 125 (23) 569 96 (762) 189 (230) (16)
% change 8.7% -1.4% 36.8% 4.5% -34.4% 13.0% -14.0% -1.1% 1.8%
Total Spending $23,778 $23,647 $24,686 $27,092 $26,561 $27,392 $27,877 $28,283
$ change 724 (131) 1,040 2,406 (531) 831 485 406
% change 3.1% -0.6% 4.4% 9.7% -2.0% 3.1% 1.8% 1.5% 2.6%
97
FY 2018-2027 Stadium Reserve Balance

($ in thousands)
Actual Actual Actual Actual Actual Projected Projected Projected Projected Projected
FY 2018 FY 2019 FY 2020 FY 2021 FY 2022 FY 2023 FY 2024 FY 2025 FY 2026 FY 2027
Beginning Balance 26,821 44,171 55,075 55,700 106,709 229,397 368,060 520,964 684,265 854,101
Prior Year Adjustments 0 0 42 1 0 0 0 0 0 0
Current Resources:
Gambling Revenue 38,675 52,835 42,494 82,782 144,819 160,900 175,050 185,650 192,350 199,250
Sales Tax Exemption for Construction Equipment 0 0 0 0 0 0 0 0 0 0
Retained City of Minneapolis Revenue 0 0 0 10,539 21,215 21,704 22,028 22,088 22,311 22,648
Corporate Franchise Tax Revenue 20,000 0 0 0 0 0 0 0 0 0
Cigarette Floor Stocks Tax Reserve Deposit 0 0 0 0 0 0 0 0 0 0
Current Resources 58,675 52,835 42,494 93,321 166,034 182,604 197,078 207,738 214,661 221,898

Debt Service 29,923 30,158 30,156 30,157 30,154 30,155 30,152 30,151 30,152 30,157
98
Total Payments for City Stadium Obligations 7,947 8,177 8,260 8,259 8,673 9,107 9,203 9,361 9,681 9,971
St. Paul Sports Facilities Grants 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700
Problem Gambling Appropriations 756 897 794 1,197 1,819 1,978 2,120 2,226 2,293 2,362
Total Uses 41,325 41,932 41,910 42,313 43,346 43,940 44,175 44,437 44,825 45,189
Sources Minus Uses 17,350 10,903 584 51,008 122,687 138,663 152,904 163,301 169,835 176,708
Expenses Covered By General Fund1 0 0 0 0 0 0 0 0 0 0
Use of the Reserve 0 0 0 0 0 0 0 0 0 0
Stadium Reserve Balance 44,171 55,075 55,700 106,709 229,397 368,060 520,964 684,265 854,101 1,030,809
1Per M.S. 297E.021, Subd. 4, the Commissioner of Minnesota Management and Budget, after consultation with the Legislative Commission on Planning and Fiscal Policy, has
authority to use funds in the stadium reserve for uses related to the stadium. In FY 2015 and FY 2016 reserve funds were used to reimburse the general fund to the extent that
current year revenues were not sufficient to cover stadium related expenses. St. Paul Sports Facilities Grants and problem gambling appropriations are not stadium related so
reserve funds were not used to cover those expenses.

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Budget & Economic Forecast November 2022

Wage and price inflation is included in revenue estimates.

U.S. Economic Outlook 14

This recession is expected to be investment-driven, with declines in investment spending in 2022,

Current Biennium: FY 2022-23 General Fund Budget

Current Biennium: FY 2022-23 General Fund Revenues

Next Biennium: FY 2024-25 General Fund Revenues

Current Biennium: FY 2022-23 General Fund Expenditures

Next Biennium: FY 2024-25 General Fund Budget

Next Biennium: FY 2024-25 General Fund Budget

Next Biennium: FY 2024-25 General Fund Revenues

Next Biennium: FY 2024-25 General Fund Expenditures

Next Biennium: FY 2024-25 General Fund Expenditures

Planning Horizon: General Fund Budget

U.S. Economic Outlook

This recession is expected to be investment-driven, with declines in investment spending in 2022,

Minnesota Economic Outlook

Broader measures of unemployment can provide additional insights into characteristics of

In October, 11,500 Minnesotans were reported as long-term unemployed, those unemployed

Forecast Comparison: Minnesota & U.S.

2020 2021 2022 2023 2024 2025 2026 2027

Council of Economic Advisors’ Statement

Current Biennium: FY 2022-23 General Fund Budget

Current Biennium: FY 2022 General Fund Close

Current Biennium: FY 2022-23 General Fund Budget

Next Biennium: FY 2024-25 General Fund Budget

Next Biennium: FY 2024-25 General Fund Budget

Planning Horizon: General Fund Budget

Current Biennium: FY 2022-23 General Fund Revenues

Biennial Comparison: FY 2020-21 vs. FY 2022-23 General Fund Revenues

Biennial Comparison: FY 2022-23 vs. FY 2024-25 General Fund Revenues

Next Biennium: FY 2024-25 General Fund Revenues

Planning Estimates: FY 2026-27 General Fund Revenues

Current Biennium: FY 2022-23 General Fund Expenditures

E-12 Education Pupils, Actual and Projected

General Fund Education Expenditures

General Fund Health and Human Services Expenditures

Next Biennium: FY 2024-25 General Fund Expenditures

Relative to end-of-session estimates, overall E-12 education spending is expected to be $9 million

Compensatory Education Revenue and Direct Certification Through Medicaid

Compensatory education revenue, also referred to as “compensatory revenue,” is state funding

E-12 Compensatory Revenue

E-12 compensatory revenue is projected to increase in FY 2024 after years of declining.

MFIP CCAP Utilization

GENERAL FUND BALANCE SHEETS

Minnesota Economic Forecast Summary

2022 2023 2024 2025 2026 2027

U.S. Economic Forecast Summary

2022 2023 2024 2025 2026 2027

Alternative Forecast Comparison

IHS Economics Baseline Forecast Comparison

2020 2021 2022 2023 2024 2025 2026 2027

Forecast Comparison: Minnesota & U.S.

2020 2021 2022 2023 2024 2025 2026 2027

Factors Affecting Tax Revenue

Factors Affecting Tax Revenue (Continued)

Factors Affecting Tax Revenue (Continued)

2022 2023 2024 2025 2026 2027