$5.1 Billion Deficit Projected For MN Budget In Coming Years

ST. PAUL, MN — Minnesota is expected to head into budget season with a tighter balance than previously predicted and a multi-billion-dollar deficit possibly looming longer term, according to a state economic forecast released Wednesday.

Fiscal years 2026-27 now have a projected balance of $616 million, down $1.1 billion compared to prior estimates, state budget officials said, citing lower income and sales tax revenue than previously predicted coupled with long-term care and special education services driving increased spending.

“We put money into things that have improved people’s lives and built for the future,” Gov. Tim Walz told the Star Tribune.

If spending growth exceeds the state’s long-term revenue forecast, Minnesota will see a more than $5.1 billion deficit by fiscal years 2028-29.

“While the budget is stable in this biennium, it’s obvious that spending reductions are needed to prevent a deficit down the road,” House Republican Leader state Rep. Lisa Demuth, R-Cold Spring, said in a prepared statement. “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.”

The House is newly divided after the November election, split 67-67 along party lines after years of Democrat control.

“While the long-term budget forecast shows reasons for concern, it is the job of the Governor and Legislature over the next two years to balance in the near-term and prepare for the long-term,” House Speaker state Rep. Melissa Hortman, D-Brooklyn Park, said in a prepared statement.

“We will do what we always have done — which is to make responsible and sustainable commitments to Minnesotans — from preschoolers to nursing home residents. ... In a tied House, we need to and will operate in a bipartisan fashion to get our work done. We are prepared to work together with legislators on both sides of the aisle who are willing to collaborate and compromise.”

At over $3.5 billion, the state’s budget reserve is at an all-time high, Minnesota Public Radio reported.

An updated forecast in February will continue to guide legislators as they work on the next budget over the winter.