What does Minnesota’s projected budget surplus mean for housing?

MHP’s Libby Murphy, Deputy Director of Policy, gives an overview of what we know about the state budget and how housing will be affected.

Minnesota Management and Budget released the official November revenue and spending forecast earlier this week, and it was a pleasant surprise. What had been a projected $2.42 billion deficit earlier this year is now a $641 million surplus for the upcoming biennium.

The November forecast in even-numbered years is critical starting point for the Minnesota Legislature. Governor Walz and lawmakers use the forecast to draft their two-year state budget proposals.

The surplus offers lawmakers an unexpected opportunity to help more individuals and businesses hurt by the second round of pandemic-related closures. While there is bipartisan support for some type of relief package in a December special session, it is unclear how much of the surplus lawmakers will agree to spend this December. A relief bill in December has broad support because Federal CARES Act dollars are largely already spent and any remaining money must be spent by the end of the calendar year.

Governor Walz and others have indicated that the surplus should be viewed as an opportunity to provide a 60-day bridge to struggling businesses and households until Congress passes a second relief package. While talks at the Federal level are accelerating, stalled talks in the fall led many to believe relief won’t come until February, after President Elect Biden takes office.

Even before the surplus announcement, Republican and DFL leaders released plans to provide financial help to businesses ordered to close and workers impacted by these closures. Walz acknowledged that the updated forecast will help accelerate discussions. Leaders on both sides of the aisle in both bodies acknowledged that the announcement provides assurances that the State has enough money in the short term to provide relief to those individuals and businesses that need it the most.

The surplus is a result of higher general fund revenues than predicted and lower spending than expected. It’s important to keep in mind that the May forecast was really a best guess estimate at the impacts COVID-19 would have on the State’s economy. While the budget outlook is also improved for the next biennium, MMB still projects a $1.273 billion deficit in the following (2022-2023). That deficit will influence lawmakers spending and revenue making decisions this year but, to what extent, remains to be seen.

Lawmakers are guaranteed to return to the Capitol, albeit mostly virtually, on December 14 for their sixth special session of the year. They are required to convene every 30 days to extend Governor Walz’ peacetime emergency. If lawmakers can agree to a relief package sooner, lawmakers will likely return sooner in order to get money quickly into the pockets of individuals and small businesses targeted through their relief efforts.

The recession’s unequal impacts

The higher than expected tax collections are attributed to the fact that the pandemic recession is hitting Minnesotans differently. Those in low-wage, service jobs most impacted by shutdowns are doing worse, especially after enhanced unemployment payments ended this summer. But many others experienced no decline or even increases to their incomes. For this reason, DFLers want to be laser focused on getting aide to lowest wage workers.

What this means for housing

Housing assistance is largely absent from the public conversations and proposals. The surplus announcement has the potential to broaden the range of direct economic supports to households in need and, potentially, housing providers.

MHP believes it is essential for the economic relief package to not only provide direct stimulus payments to households to help them pay their bills through the next few months; it must also include additional housing assistance dollars to help households catch up on past due housing payments. Debt as a direct or indirect consequence of COVID-19 and the pandemic recession is a financially crippling event that Minnesota lawmakers need to address. The Great Recession demonstrated what long-term consequences housing related debt has on low income households, especially Black, Indigenous and People of Color (BIPOC) households. And, when these households cannot fully participate in the economy, everyone suffers.

MHP joins Homes for All is calling on lawmakers to invest an additional $50 million in emergency housing assistance. Despite receiving nearly $700,000 in daily requests, Minnesota Housing will stop taking new applications after 11:59 p.m. on December 7 in order to process all payments. Households are still learning about the program and how to navigate the process. Additionally, the proposed stimulus amounts for direct payments may not be enough to help all households make their rent, mortgage, HOA, utility or other housing related expenses. MHP calculates that a low wage worker in the food prep or service industry could find themselves paying anywhere between 90-103 percent of their unemployment check on rent.