On Tuesday, Minnesota Management and Budget released the November forecast, showing a projected $188 million deficit due to lower-than-expected revenues based on assumptions about federal legislation and U.S. GDP and wage growth. The forecast also reflected $178 million in state spending on the federal Children’s Health Insurance Program (CHIP), nearly all of which would be backfilled once CHIP is renewed at the federal level. Despite the uncertain forecast, Republican leaders touted Minnesota’s strong economy, and anticipated stronger revenue estimates when the forecast is updated in February.

“Thanks to Republican efforts to grow jobs and put more money back in the pockets of families, Minnesota’s economy remains one of the strongest in the nation,” said House Speaker Kurt Daudt, R-Crown. “Unemployment is at its lowest level in 17 years, and wages are growing. Our national economy is growing as well, and I expect a much stronger revenue report as we look ahead to the February forecast.”

Assumptions about federal legislation and U.S. GDP and wage growth contributed to lower-than-expected revenue assumptions. The forecast assumes that no tax bill will be passed at the federal level despite passage in both the House and Senate last week, and assumes 2.2% GDP growth in 2017 despite 3.1% growth in the second quarter and 3.3% growth in the third quarter.

“This November forecast was obsolete on arrival,” said Senate Majority Leader Paul Gazelka. “Once we take into account federal tax reform and spending, the Minnesota budget will be right on track. The legislature will wait for the February update before making any policy decisions – just about the time seniors, farmers, small business owners and college students will begin seeing the benefits of the tax reform passed in the 2017 session.”