Minnesota’s February and March revenues fall 2.1 percent below forecast

Minnesota’s general fund revenues for February and March fell below estimates by $46 million, or 2.1 percent, according to the April 2009 Economic Update (PDF) released Friday by the Department of Management and Budget. The two biggest revenue sources tumbled by even greater margins–income tax proceeds by 4.5 percent ($47 million) and sales taxes by 4 percent ($25 million)–but those losses were partially offset by higher-than-expected collections from business, motor vehicle and "other" taxes and fees, which outperformed the forecast by a total of $26 million.

The "other" category featured stronger than anticipated revenues from estate taxes, health care surcharges, and investment income.

The news could have been worse, particularly if the release is correct in asserting that the income tax shortfall stemmed largely from "lower than projected bonus payments, not lower wages."

The release also notes that Global Insight Inc., the firm that the state relies on it for its economic projections, has adjusted its GDP forecast downward. GII is now predicting the U.S. economy will contract 3.5 percent in 2009 and grow just 1.4 percent in 2010. In February, GII had projected 2.5 percent contraction this year and 2 percent growth next year.

As for the timing of recovery, GII now says real GDP will not return to its pre-recession level until spring of 2011. And they expect employment to take another two years to rebound, finally reaching pre-recession totals again in early 2013.

The update also said that Minnesota’s four-week rolling average of continuing unemployment claims stands at 128,000, or 50,000 more than a year ago at this time.