Minnesota’s projected budget surplus for the next two years has decreased due to economic uncertainty, while a future deficit has grown to about $6 billion. The state now has a surplus of $456 million for the next budget cycle, which is $160 million lower than previous estimates. The projected deficit for the 2028-2029 biennium has also increased from $5.1 billion to $6 billion.
State Budget officials mentioned that shifting federal policies introduce significant uncertainty to the projections. Budget Commissioner Erin Campbell emphasized the importance of taking the long view when setting the next budget. Long-term care costs for people with disabilities and special education for students were identified as the biggest drivers of the projected deficit.
The economic forecast sets the stage for spending discussions at the Capitol, as the Legislature must work with Gov. Tim Walz to pass a new two-year state budget by its May 19 adjournment deadline. Governor Walz and DFL legislative leaders have cited an aging population and increased need for services as reasons for the budget situation.
Republicans have blamed Democrats for spending most of the previous $17 billion surplus, with the historic surplus in 2023 leading to a nearly $71 billion two-year budget. The budget included some one-time spending and new programs that expanded the state budget. Budget officials will provide more details about Minnesota’s economic outlook at a news conference, as they navigate the reduced surplus and increased deficit in planning for the state’s future financial landscape.
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