Minnesota is expected to have a $616 million state budget surplus when the 2027 fiscal year ends in June of that year, according to a projection from Minnesota Management and Budget (MBB).
While the budget surplus may seem like good news, that projection is $1.1 billion lower than “prior estimates.” Additionally, MMB said that lower tax revenues and higher spending has resulted in a “growing structural imbalance” in the future budget planning process.
NEW: Minnesota is projected to have a $5 billion budget deficit in FY 2028-29. The state had a $17.5 billion surplus in February 2023. pic.twitter.com/Vm0zWqXleI
— Alpha News (@AlphaNewsMN) December 4, 2024
If current taxation and spending policies continue, that imbalance is projected to become a roughly $5.1 billion deficit during the 2028-29 fiscal years.
Recent budget history
In February of 2023, Minnesota had a projected budget surplus of roughly $17.5 billion. However, Democrats in control of the Minnesota Legislature and the state governorship embarked on an unprecedented spending spree when they crafted the state’s two-year budget in 2023.
In short, Democrats passed many new programs which ballooned the state’s two-year budget to a record $72 billion amount. For context, the state’s two-year budget crafted in 2021 was just over $51 billion.
This roughly 40% increase in spending was paid for with new taxes, one-time federal money, and by tapping into the projected surplus funds.
Now, the multi-billion surplus is gone and state legislators will have to make many tough decision in the next few months as they craft Minnesota’s next two-year budget.
How the projections impact next year’s legislative session
To start, Minnesota has a balanced budget requirement in the state constitution. This means the state cannot spend more than it takes in and cannot run a deficit. Every odd-numbered year, state legislators and the governor are responsible for passing a two-year budget.
As such, the state’s elected officials will either need to raise taxes or cut spending in order to make sure Minnesota’s budget does not go underwater in the years ahead.
Speaker-designate Lisa Demuth, the leader of the House Republicans, put out a statement regarding the new budget projections early Wednesday morning.
“While the budget is stable in this biennium, it’s obvious that spending reductions are needed to prevent a deficit down the road,” said Demuth. “House Republicans are putting state agencies on notice: the times of automatic budget increases and dramatic government employee growth are over, and we expect you to join us in working to find savings and root out waste and fraud.”
This is a developing story.
Luke Sprinkel
Luke Sprinkel previously worked as a Legislative Assistant at the Minnesota House of Representatives. He grew up as a Missionary Kid (MK) living in England, Thailand, Tanzania, and the Middle East. Luke graduated from Regent University in 2018.
