Senjem Update

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Dear Friends,

I would like to send a short Minnesota Senate update.

Minnesota Management and Budget (MMB) released the state’s November budget and economic forecast, showing a projected $188 million deficit for the 2018-19 fiscal year and a $586 million deficit for FY 2020-21. The projected deficit is largely due to growth in projected spending and lower-than-expected revenues based on lower growth estimates at the federal level.

The forecast does not take into account the federal tax reform bill recently passed by Congress which is expected to improve the state’s fiscal outlook. In addition, the forecast also reflects $178 million in spending on the federal Children’s Health Insurance Program (CHIP) that will be reimbursed once CHIP is renewed by Congress. The recent budget forecast assumed no federal tax bill would have been passed and assumes 2.2% GDP growth in 2017 despite 3.1% growth in the second quarter and 3.3% growth in the third quarter.

Here is what we know:

  1. This November forecast is already obsolete because so many variables are going to change before the 2018 session.
  2. The legislature did its job and all signs in the forecast point to a healthy, growing and robust Minnesota economy.

Obsolete Forecast:

  • The recent state budget forecast did not take into account the Federal Tax Cuts and Jobs Act bill passed by Congress this week. Forecasters admit federal tax reform will improve our outlook, but took it out of the November forecast at the last minute.
  • The GDP assumptions used in the forecast are too low. MMB predicted growth of 2-2.5% even as the US economy grew at 3.1% during the second quarter this year and 3.3% during the third.
  • The forecast assumes $178 million in new state spending for the Children’s Health Insurance Program (CHIP). This funding will be restored by the federal government before the end of 2017.

Minnesota is booming:

  • State unemployment is at 3.3%, lower than the national average.
  • State wage growth is projected to increase from 2.8% in 2016 to 4.3% in 2017 to 4.7% in 2018.
  • Minnesota’s exports this year increased 5% in the 1st quarter, 7% in the 2nd quarter, and 11% in the 3rd quarter … the growth of exports in Minnesota is more robust than national trends.
  • Minnesota has experienced more than seven years (87 months) of over the year (unadjusted) employment expansion.

State officials will release an updated forecast in February. It is this forecast that will be used to guide the 2018 legislative session, and it is anticipated to include stronger revenue estimates.

Presently, the Federal Tax Cuts and Jobs Act is awaiting the signature of the President. With the passage of this legislation, the Minnesota Department of Revenue will need appropriate time to deliver estimates and the effects on Minnesota. As a member of the Minnesota Senate Taxes Committee, I look forward to take part in informational hearings after the bill is signed in to law.

I would like to wish you a very Merry Christmas and the happiest of holidays! My best wishes to you, and your family, for a blessed holiday season.

It is my honor to continue serving as your voice in the State Senate. Please join me in keeping the courageous men and women of our armed forces, and law enforcement, in our thoughts and prayers this holiday.



Also, if you see a bell ringer make a donation.  The Salvation Army does a great job helping many people in difficult situations.

David H. Senjem
State Senator
District 25
3401 Minnesota Senate Building
St. Paul, MN 55155
[if JavaScript were enabled there would be an email address here]

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