Pandemic Crisis Impacting State's Economic and Budget Outlook

The potential economic impact of the coronavirus epidemic on Minnesota’s state budget was the focus of the Senate COVID-19 Response Working Group’s teleconference meeting Monday, April 6. Members heard from MMB Commissioner Myron Frans, State Economist Dr. Laura Kalombokidis, and representatives from the National Conference of State Legislatures.

Five weeks ago, the state was projected to have a $1.5 billion dollar surplus. Due to the pandemic, national economic projections are now pointing to a recession, the length of which may last at least as long as the economy is halted by the virus. According to Kalambokidis, the state’s economist, state economic data lags the real economy, but the unprecedented rate of unemployment claims and the payment delays of sales tax receipts make it difficult to provide an economic forecast at this time. “It’s almost like waiting for a reverse tsunami. …waiting for a tsunami of revenues not to show up,” she said.

Frans said the state has implemented a hiring freeze for all but high-priority positions and recommended surgical and targeted fiscal decisions as the state faces a downturn. Senate and NCSL staff offered initial guidance on how the state may be able to use the $2 billion dollars allocated to Minnesota as part of the federal CARES Act.