The Minnesota state government will face an estimated $188 million deficit over the current two-year budget cycle, the Minnesota Office of Management and Budget announced Tuesday.

MMB reached its November projection based on reduced U.S. economic growth forecasts and impacts of policies enacted during the 2017 Minnesota legislative session. The forecast also anticipated the negative balance growing to $586 million during the 2020-2021 biennium.

The revenue forecast for the current biennium is $559 million lower than end-of-session estimates. 

Uncertainty around federal policies — like the tax bill heading to conference committee in the U.S. House and Senate — could pose significant risks to the forecast.

Gov. Mark Dayton said the forecast is “fraught with uncertainties” in a statement.

Dayton said the projected 2018-2019 budget deficit of $188 million would drop to $10 million if Congress refunds the Children’s Health Insurance Program. 

“I want to emphasize that our state’s overall fiscal situation is very solid,” Dayton said in a statement. “We have accumulated a Budgeted Reserve of $1.6 billion, more than enough to support us through any of these economic uncertainties.

MMB expects all major tax types to show reduced growth, with individual income taxes projected to decrease by $461 million throughout the current biennium.

Spending is expected to be $398 million higher than expected due to a greater forecast of special education spending and unspent appropriations from 2017 to be spent next year.    

The forecasted deficit could have implications for the University of Minnesota, as the institution enters the 2018 legislative session with $238.5 million in capital requests. 

The University is requesting state funding for the following: Higher Education Asset Preservation and Replacement, a Pillsbury Hall renovation, classroom and lab renovations at the University’s Crookston, Morris and Duluth campuses and repairs of Duluth’s Glensheen mansion.