Minnesota’s latest budget forecast was released Thursday morning and the initial numbers show the state’s financial outlook has improved, but problems are still on the horizon.
According to Minnesota Management and Budget (MMB), the state has a projected $2.465 billion surplus for the current two-year budget cycle that runs through June of 2027. MMB’s forecast also notes that Minnesota has rainy day funds that total more than $3.7 billion.
However, Minnesota is facing a $3 billion deficit in the following 2028-29 budget cycle even after the current $2.465 billion surplus is applied to the state’s books. In short, this means spending is projected to outpace revenues by more than $5.4 billion in 2028-29.
MMB says the deficit is the result of “higher health care costs and slow economic growth.”
The new forecast is a marked change from the previous forecast in March. At that time, Minnesota was projected to have a $456 million surplus for the current budget cycle and a $6 billion deficit in the upcoming 2028-29 cycle.
Since that March forecast, a bipartisan group of state political leaders passed a $66 billion two-year state budget, the second largest in Minnesota history. That budget represented a significant decrease from the previous $72 billion two-year budget passed by Democrats.
When the $66 billion budget was passed in June, state leaders said the new budget would decrease the looming $6 billion deficit by roughly 45%. News that the deficit has essentially been cut in half confirms what state leaders had predicted.
All of this is a dramatic shift from February of 2023 when Minnesota had a projected $17.5 billion surplus. After that surplus was unveiled, Democrats in control of state government embarked on a massive spending spree that increased the size of the state budget by 40%.
This new forecast, along with another forecast scheduled for release in February or March, will have have a major impact on the state’s political landscape as legislators prepare for the 2026 legislative session and candidates line up for the 2026 elections.
In a statement, Gov. Tim Walz said, “Despite the President’s tariffs and destabilization of health care costs, Minnesota’s annual budget forecast has improved in both the short and long term thanks to the responsible budgeting we’ve done in Minnesota.”
Walz acknowledged that the budget forecast “does show uncertainty,” but “we’re standing on a solid foundation, and we have the tools to continue managing a budget that makes Minnesota a great place to live.”
In a press conference about the budget forecast, Republican House Speaker Lisa Demuth sounded the alarm about the state’s current finances, saying, “we are projected in the years [2028-29] to spend more than $5.4 billion dollars more than we collect in taxes.”
“And this is even after our Democrat colleagues raised our taxes and fees on all Minnesotans by over $10 billion [in 2023],” added the House speaker and gubernatorial candidate.
Similarly, GOP Sen. Eric Pratt said “the small short-term surplus is driven by a massive $10 billion in tax hikes on every Minnesotan. The billions in tax hikes aren’t enough to keep up with Democrat spending demands and out of control fraud throughout state government.”
Meanwhile, Republican gubernatorial candidate Chris Madel said “the forthcoming budget deficit in Minnesota and the failure of Walz and other elected leaders to stop the out-of-control spending & fraud reinforces why our state desperately needs change.”
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.
