ST. PAUL — As Minnesota hospitals prepare for a swell of patients seeking care for the coronavirus, state budget officials said they're anticipating another problem, a "reverse tsunami" in funds coming in.
In a matter of weeks, conversations about how to spend a projected $1.5 billion surplus evaporated and now Minnesota will have to change course or face a deficit, budget officials told lawmakers on Monday.
Between March 16 and Monday, April 6, 342,043 Minnesotans filed for unemployment insurance following the illness' spread and state response to limit COVID-19. And health officials reported that 986 people had been infected, of roughly 28,128 tested for the disease. Thirty of those perished from the illness or from complications.
Since the state's first case of COVID-19, the illness caused by the coronavirus, was reported last month, businesses have been asked to shutter, hundreds of thousands have lost their jobs or seen their hours cut. And that raised questions for concerns for lawmakers who count on income taxes and sales tax revenues to pay for health care, education and public safety programs run through the state.
While many questions remained on Monday, budget officials said they were preparing for a sizable blow.
"We know that people working on the front lines in medical care may feel like they're waiting for a tsunami of patients to come in," State Economist Laura Kalambokidis said. "We're waiting for a tsunami of revenues to not show up."
New projections in terms of what the state could expect in revenues sparked discussions about cuts and hiring freezes to help break even. Minnesota Management and Budget Commissioner Myron Frans said the state had already frozen non-critical hiring and was waiting to see how $2 billion in federal aid funding could help offset payments Minnesota had already committed to addressing the pandemic.
"We're trying to figure out how to manage these different buckets of funds that we have available to make sure we use them exactly as we should, as quickly as we should and as effectively as we can," Frans said. “Our actions need to be really surgical and targeted because there are a lot of services we want people to get."
So far, $69 million of the aid funding designated for health care providers has been tentatively approved for gloves, masks, gowns and other medical supplies, Frans said. But big-ticket items like boosting hospital bed capacity and intensive care unit beds have yet to be funded through the state, Frans said.
State budget experts on Friday will outline how revenues coming into the state for February and March compare to what they forecast. And it’s not yet clear how those numbers will reflect the economic shock from the pandemic and orders aimed at curbing it as compared to delayed sales tax receipts that will come in later this month.
Senate Majority Leader Paul Gazelka, R-East Gull Lake, said the early hiring freezes were a good start but suggested the state should review other "extracurricular" spending it could pare away given the projected funding shortage on the horizon. Gazelka has also urged the governor to open up additional outdoor jobs as essential sectors under his stay at home executive order.
Democratic legislative leaders a day prior said they'd prioritize funding to combat the pandemic and Gov. Tim Walz defended his orders limiting social gatherings and closing businesses temporarily to limit the disease's spread in Minnesota.
"Trust me, no one wants to run a deficit as governor. No one wants 15% unemployment," Walz told reporters. "Getting on the front end of it, we avoided something catastrophic."