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Minnesota faces a $2.4 billion projected budget deficit between now and July 2021 tied to the economic fallout from COVID-19.

The estimate, released Tuesday, essentially shows a $4 billion swing from February, with revenues expected to trend $3.6 billion lower and spending, including funds approved since February, expected to rise $391 million.

State budget leaders painted a grim picture of the state’s short-term economic outlook. Laura Kalambokidis, the state’s economist, said state consultants project Minnesota’s economic output to drop three consecutive quarters before a return to positive territory.

COVID-19 cost “have rocked Minnesota’s economy” and will continue to do so until the crisis ends, she said.

Walz told reporters that Minnesota’s fiscal health was one of nation’s strongest heading into the pandemic and could be better positioned to get through it. But he warned of sacrifices ahead.

The worrisome budget numbers arrived Tuesday minutes after the Health Department reported 455 deaths, up 27 from Monday, with the counts of people currently hospitalized (434) and in intensive care (182) hitting new highs.

Total cases since the pandemic began leaped again Tuesday to 7,851, up 617 from the prior day, although department statistics show nearly 60 percent of patients with the disease have recovered to the point they no longer need to be isolated.

The number of cases discovered in Minnesota has accelerated sharply over the past week as the state’s testing push intensified.

“Minnesota’s numbers, we are not at our peak yet,” Walz said. “There are some dark days ahead of us. But we have changed the calculus on this.”

 

COVID-19 opens a big hole in the state budget

The newest budget data Tuesday confirmed a widespread belief a deficit was ahead. It is rare for an assessment of this kind to be done, but the unparalleled circumstances led to it.

It’s a sharp turn from February when an economic forecast predicted a $1.5 billion surplus would accumulate by next summer. A two-year, $48 billion budget that was approved last year runs through July 2021.

The coronavirus pandemic pushed many people out of work and led to restrictions on commerce and travel that reduced consumer spending. Last month, officials reported tax collections had already dipped by $100 million in a period that captured only a small fraction of the COVID-19 fallout.

“The $2.359 billion budget reserve remains available to mitigate the budgetary impact of the crisis,” according to Minnesota Management and Budget, the state’s budgeting agency. “Given the uncertainty about the path of pandemic, the economic outlook will remain volatile for some time.”

Later, MMB Commissioner Myron Frans said Minnesota shouldn’t drain the reserve entirely because this storm could last awhile.

The Legislature has two weeks left before it must adjourn its session.

While federal money is expected to help ease the strain, Walz said he’s operating as though the deficit could deepen. State leaders, he said, can’t work on the belief that they can “just dump the budget reserves in and you’re even today, because tomorrow if we go back in, it’s not there.”

 

Elective surgeries, dental work OK’d to resume

The governor had put a hold on elective surgeries and non-emergency dental procedures over the past weeks to preserve crucial protective gear and equipment needed to respond to a surge in COVID-19 cases. On Thursday, he said that hospitals, so far, have enough gear to handle the cases.

On Tuesday, he formally announced a new executive order that will allow doctors, hospitals and dental clinics to return to that work.

Walz acknowledged that health care workers were nervous about this move, concerned that it will siphon off supplies of masks and other personal protective gear needed as the surge in COVID-19 hospitalizations approaches.

However, he said officials felt confident in their supplies and called the return of elective surgeries a calculated risk that “strikes the proper balance” between safety and restarting this economic sector.

 

No ‘red alarm’ yet as cases, ICU patient numbers climb

Health Commissioner Jan Malcolm said that the latest numbers on deaths showed the ongoing trend Minnesota’s seen since the pandemic began — nearly all of those who died were living in long-term care facilities and had underlying health problems.

Despite the increase officials are seeing now in cases and hospitalizations, she said the climb remained within the state’s ability to manage it.

Two key metrics — how long it takes for the raw case count to double and how long it takes for current hospitalizations to double — remained relatively moderate. The “red alarm” will sound if and when case counts start doubling every two to three days; right now it’s about eight days, she said.

Patients needing ICU care aren’t rising as quickly as current hospitalization. “We’re still feeling good about that,” she added.

She cautioned, though, that Minnesota was not yet at the steepest part of its curve.

 

‘Monumental hit’

The latest numbers come a day after Hospitality Minnesota warned many of its members may go under if conditions don’t improve soon.

While many people got back to work in Minnesota this week, continued restrictions are putting restaurants, bars, hotels and more on the brink, Liz Rammer, CEO of the trade group Hospitality Minnesota, said Monday.

“We know from our recent survey that more than half these businesses face certain, permanent closure in the next two months on the current course,” she said.

While Rammer said her members understand the need to check the spread of the coronavirus, they’ve taken a “monumental hit” the past six weeks. “We’re confident,” she said, “that our hospitality businesses are ready to open now. Our businesses and the public are ready to approach this new new normal.”

Walz on Monday reiterated the need to balance public health with the need to restart more sectors of the economy, saying “this is the question that’s vexing everyone.” He did not give a date as to when restaurants and bars could start letting people dine in.

One hopeful statistic from Monday: about 58 percent of Minnesota’s total COVID-19 patients have recovered. Last week, that percentage got as low as about 40 percent as testing, and case counts, increased.

 

Many new cases focus around packing plants

The jump in positive cases continues to be driven by a handful of counties with outbreaks centered around meatpacking plants. Testing has intensified around those outbreaks and led to more positive tests for the disease.

About 25 percent of the 1,000 new cases over the weekend came from five counties — Nobles, Kandiyohi, Stearns, Martin and Cottonwood counties — that have seen outbreaks in food processing plants, Health Commissioner Jan Malcolm said.

Cases in Nobles County in southwestern Minnesota, where an outbreak centered around the JBS pork plant in Worthington, continue to swell. The county continued to have the largest outbreak outside the Twin Cities and the largest by far of any Minnesota county relative to its population.

Confirmed cases in Nobles County have jumped from a handful in mid-April to 1,069 on Tuesday as testing in the region accelerates, revealing more cases. That’s about 1 in 20 people in the county confirmed infected.

The JBS plant shut on April 20 as executives worked to control the disease’s spread. The union representing workers at JBS said Sunday that it’s been told the facility will reopen on Wednesday. In a statement, union leaders said workers will be spaced farther apart and the plant will expand cleaning and disinfecting.

The closure of the plant and others in the Midwest has caused major disruption in the supply chain, with some hog farmers forced to kill healthy pigs because there was no place to process them.

Similar problems were reported in Stearns County, where COVID-19 cases tied to two packing plants — Pilgrim’s Pride poultry plant in Cold Spring and Jennie-O Turkey in Melrose — have skyrocketed. An undisclosed number of workers at both plants have tested positive for the virus.

At the beginning of last week, there were 55 confirmed coronavirus cases in Stearns. By Sunday, as testing for the disease intensified, there were 589 and by Tuesday confirmed cases had jumped again to 815.

Kandiyohi County in west-central Minnesota is also seeing cases jump two weeks after officials with the Jennie-O turkey processing plant there said some employees had tested positive for the coronavirus. The county had confirmed three COVID-19 cases back then.

On Tuesday, the Health Department reported 200 people in Kandiyohi County have now tested positive.

 

More Minnesotans back to work

While the uncertainty continued for bars and restaurants, the state on Monday lifted some restrictions on retailers that could put as many as 30,000 Minnesotans back on the job; bars and restaurants, however, remain takeout-only until May 18.

Walz’s tweaked stay-at-home order lets retailers and other businesses offer curbside pickup of purchases.

The governor on Monday said that about 91 percent of Minnesota’s workforce is now able to return to their workplaces with hygiene and distancing rules in place. Restaurants and bars remain the biggest sector still unable to bring customers back into their buildings.

Rammer made it clear the breaking point is approaching.

“Reopening won’t be sufficient,” she said. “These businesses really need an extra hand up.”

For those that do survive, it will still take time for them to order food and get ready to open. “The coolers have been empty for some time,” she said, emphasizing that business owners want certainty on when they can open.

Walz said he could not yet give dates for the next round of business reopenings. “I don’t have an exact date. … The sooner you can get certainty, the better.”

 

Area lab-confirmed COVID-19 cases

Faribault County: 7

Freeborn County: 37

Mower County: 33

Steele County: 25

Waseca County: 6

— Information from the Minnesota Department of Health