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https://www.duluthnewstribune.com/news/minnesota/minnesota-budget- projections-show-xx-looming-deficit-xx-surplus

ST. PAUL — The Minnesota Management and Budget office on Thursday said the state’s looming deficit is now projected at $6 billion, $1 billion higher
than November estimates.

Minnesota Management and Budget officials said during a February Budget Forecast review on Thursday, March 6, that Minnesota’s estimated deficit
for the 2028-29 fiscal year had risen in the last three months. The
November budget forecast said the state would hit a $5 billion deficit for 2028-29, but that number is now expected to reach $6 billion.

MMB Commissioner Erin Campbell said a main factor for the $6 billion
deficit was state spending that continues to outpace revenue. Campbell
also cited “inflationary pressures" at Thursday’s forecast review.

Ahna Minge, state budget director with MMB, said Thursday's projections
could change based on how the state completes the 2024-25 fiscal year and
how allocations are made as the Legislature completes the 2026-27 budget.

“It is really important to emphasize that this money doesn’t go
automatically to programs; it has to be appropriated by the Legislature,”
she said. “Policymakers have the choice, the discretion, to address inflationary pressures to spend this money on something else or to leave
it unspent.”

The two largest projected areas of spending for the state’s 2026-27 budget
are education at $26 billion and Health and Human Services at $24 billion, according to Thursday’s projections.

The state’s projected surplus for 2026-27 has also changed since MMB’s
last update. The expected surplus for fiscal year 2026-27 is down to $456 million, $160 million lower than November’s budget forecast of $616
million.

During the Legislature’s last budget session in 2023, Minnesota was
working with an $18 billion surplus and approved a budget of $72 billion ,
a jump from the previous $52 billion budget.

Elected officials weigh in
Gov. Tim Walz on Thursday again stood in defense of state spending
decisions made by the Legislature in 2023.


“I’ll say what I stood here in November and said, and it holds true maybe
more so now: Minnesota has put our money into things that invested to
improve people’s lives, public education, tax cuts for the middle class, feeding our kids education and innovation in our business community,” he
said.

Speaker Emeritus Melissa Hortman, DFL-Brooklyn Park, said the forecast
review was an important step in creating a sustainable budget for the
state, while also pointing to federal changes.

“Today’s near and long-term economic forecast is helpful and necessary for
the Legislature and the governor to put together a state budget … but
there are irresponsible cuts that are proposed at the federal level that
will swamp everything we’ve done here,” she said.

Senate Majority Leader Erin Murphy, DFL-St. Paul, also directed blame
toward Washington.

“Only one thing has changed since the November forecast, and that is the inauguration of President Donald Trump,” she said.

Leader Harry Niska, R-Ramsey, condemned Democrats’ finger-pointing to the federal level and pointed instead to Democrats’ spending choices in the
last budget cycle.

“Democrats have tried to distract and deflect from their failed record,”
he said. “They want to talk about everything else, other than what’s
happening in our Minnesota budget ... in our Minnesota as a result of
Minnesota policies. But the reality is, and what we see in the budget
forecast, is that our fiscal house is out of order at the state level, and
it’s out of order because our state economy is fundamentally out of
balance.”

Lawmakers on Thursday were hesitant to specify potential areas for cuts in their budget proposals, which are set to be due at the beginning of April,
but Republicans said they’re looking at areas of waste, fraud and abuse.

Democrats did not give any specifics, but Murphy said they are still
looking at everything and that their objective is to “balance the budget,
to balance it out for the people of Minnesota, and to protect Minnesotans, particularly against the harms that they're coming our way from
Washington, D.C.”

A balanced budget must be passed by the Legislature and signed by Gov. Tim
Walz by July 1 to avoid a full or partial government shutdown with
services restricted.

Federal impacts
Campbell said that Thursday’s full projections will not include potential federal cuts from the U.S. House’s budget proposal, which proposes almost
$2 trillion in spending cuts over a 10-year period and up to $880 billion
in Medicaid cuts.

“Want to underscore that, like other states, we are closely monitoring unprecedented changes at the federal level, changes that are still very
much in flux,” she said.

Under the current operating budget for 2024-25, the state has a total of
$119 billion in revenue, with 34% coming from federal funds. In 2025
alone, the state has budgeted $23 billion in federal funds — including $11 billion for Medicaid — according to MMB’s Feb. 27 presentation before the Senate Finance Committee.

Minnesota State Economist Anthony Becker said Thursday that recently
imposed tariffs from Trump’s administration are not factored into the
state’s budget projects. Becker said, however, tariffs and spending cut proposals pose “risk” to the state’s budget.


“The possible effects of proposed tariffs and immigration policies could
put upward pressure on prices and wages, threatening the forecasted
monetary policy path, and high federal deficits and national debt could
weigh negatively on economic growth in the long term,” he said.

Campbell echoed that the uncertainty from federal funding, which comprises almost a third of the state’s current budget, could be “devastating.”

“That’s an enormous amount of money, and if federal action meant that, we
would lose those resources, the impact of the state budget is really devastating,” she said.


--
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