Minnesota’s budget basics

According to the National Association of State Budget Officers (NASBO), Minnesota’s total expenditures in fiscal year (FY) 2021 were $50.0 billion, including general funds, other state funds, bonds, and federal funds. NASBO reported that total expenditures across all states in FY 2021 were $2.7 trillion, ranging from $4.7 billion in Wyoming to $512.8 billion in California.

Each state allocates spending and taxes differently among different levels of governments, and local governments often administer programs with state funds, so combined state and local government data show a more complete picture of individual benefits and contributions when comparing states.

Per the US Census Bureau, Minnesota’s combined state and local direct general expenditures were $62.7 billion in FY 2019 (the most recent year census data were available), or $11,125 per capita. (Census data exclude “business-like” activities such as utilities and transfers between state and local governments.) National per capita direct general expenditures were $10,161.

Minnesota’s largest spending areas per capita were public welfare ($3,021) and elementary and secondary education ($2,422). The Census Bureau includes most Medicaid spending in public welfare but also allocates some of it to public hospitals. Per capita spending is useful for state comparisons but is an incomplete metric because it doesn’t provide any information about a state’s demographics, policy decisions, administrative procedures, or residents’ choices.

Minnesota’s combined state and local general revenues were $64.6 billion in FY 2019, or $11,462 per capita. National per capita general revenues were $10,563. Minnesota uses all major state and local taxes. After federal transfers, Minnesota’s largest sources of per capita revenue were individual income taxes ($2,199) and property taxes ($1,727).

Minnesota’s politics

Governor Tim Walz, a Democrat, was elected in 2018 with 54 percent of the vote. The next gubernatorial election is in 2022.

Minnesota has a divided government. Democrats control the House of Representatives, (69 Democrats to 64 Republicans and 1 independent) while Republicans control the Senate (34 Republicans to 31 Democrats and 2 independents). All Minnesota House seats are on the ballot in 2022 because representatives serve two-year terms. Senators serve a combination of two- and four-year terms during each decade’s legislative district apportionment cycle. This 2-4-4 term system ensures all Senate seats are up for election after new legislative district boundaries are drawn. All senators are therefore up for election in 2022.

Minnesota’s budget institutions, rules, and constraints

Minnesota uses a biennial budget. The legislature is not required to pass a balanced budget and the governor is not required to sign one. However, the governor must submit a balanced budget, and the state’s own-source revenue and debt allowance must meet or exceed its expenditures. Additionally, deficits cannot be carried over into the following year and there are limits on total authorized debt incurred by the state.

(Note: Some states have informal budget institutions that constrain overall spending growth or a specific expenditure’s growth.)

Minnesota’s current budget

Governor Walz released his FY 2023 supplemental budget proposal in January 2022 (the state uses a biennial budget) and gave his state of the state address in April 2022.

Minnesota enacted its FY 2022-23 biennial budget in June 2021. The budget included total spending of $53.7 billion in FY 2022 and $48.6 billion in FY 2023, with $25.4 billion in general fund spending in FY 2022 and $27 billion in FY 2023.

Under the American Rescue Plan, Minnesota will receive $2.8 billion in direct state fiscal aid and $1.8 billion in local government aid from the federal government. As of January 2022, Minnesota had spent part of its ARP funds on revenue replacement, public health programs, and education spending.

According to NASBO, Minnesota’s recent expenditure totals (general fund spending/total spending, including federal transfers) were:

• FY 2021: $24.0 billion/$50.0 billion

• FY 2020: $23.8 billion/$43.0 billion

• FY 2019: $23.1 billion/$40.8 billion

For more on Minnesota’s budget, see

• Minnesota Management and Budget,
• the Minnesota House of Representatives Fiscal Analysis Department,
• the Minnesota Senate Counsel, Research and Fiscal Analysis,
• the Minnesota Legislative Reference Library.

Minnesota’s economic trends

Minnesota’s per capita income (per the Bureau of Economic Analysis) was $65,486 in 2021, ranking 14th among the states. It was above both the national average of $63,444 and the Plains regional average of $60,113. The state’s median household income (five-year estimate) was $73,382 in 2020, ranking 13th among the states and above the national average of $64,994. Minnesota’s poverty rate was 9.3 percent in 2020 (five-year estimate), below the national rate of 12.8 percent.

Although Minnesota’s averages tell a story about the entire state, Minnesota is composed of diverse localities. For example, the city of Winona’s median household income was $48,653, and its poverty rate was 19.1 percent; the city of Chanhassen’s median household income was $124,184, and its poverty rate was 2.9 percent.

Minnesota’s unemployment rate has historically been below the national average. (See how COVID-19 is affecting state employment and earnings data.)

Unemployment rates (like other economic indicators) often vary significantly by race and ethnicity. In Minnesota, the average unemployment rate in 2021 was 3.6 percent for white residents, 6.2 percent for Black residents, and 4.7 percent for Hispanic or Latino residents. (This is preliminary data. See the 2020 data for a more detailed breakdown of state unemployment rates by race and ethnicity.)

The major industries that contributed the most to Minnesota’s gross domestic product (GDP) in 2020 were finance, manufacturing, professional services, social services (i.e. health and education), and government. Manufacturing, professional services, and social services contributed more to Minnesota’s GDP than they did to the nation’s and region’s GDP, while finance and government were less important to Minnesota than they were to the nation and region in 2020.

Looking at more specific industries, among those that accounted for at least one percent of Minnesota’s GDP in 2019, management of companies produced far more for the state than for the nation, contributing 4 percent to Minnesota’s GDP and 1.9 percent to the nation’s. Other industries that overperformed in Minnesota relative to national averages in 2019 were wholesale trade, computer manufacturing, insurance carriers, and miscellaneous manufacturing.

Minnesota’s demographics

As of July 2020, Minnesota’s population was 5,657,342. That was up 6.5 percent from 2010. The state’s population growth rate was equal to than the nation’s 6.5 percent growth over the same period. The Urban Institute estimates the state’s population will increase 15.6 percent between 2010 and 2030, less than the nation’s estimated growth rate of 16 percent.

Additional resources

• The State and Local Finance Initiative’s Backgrounders explain the tax and spending issues highlighted in these briefs.
• The State Economic Monitor presents updated data and customized visualizations of state economic indicators.
• State and Local Finance Data: Exploring the Census of Governments allow users to sort, customize, and download the Census of Governments State and Local Finance series data featured in these summaries.
• The State Tax and Economic Review series provides quarterly reports on state tax collections and underlying economic trends in all 50 states.
• The Urban Institute’s State Tax Data Subscriptions provide access to up-to-date revenue data in all 50 states.