Minnesota Budget Short-Term Surplus Grows, Deficit Looms
St. Paul, MN (MinnesotaNow) - Minnesota's state budget outlook has improved, but the long-term situation remains troubled.
The Office of Minnesota Management and Budget today issued an updated budget and revenue forecast, which is a key document for state lawmakers as they move through the current legislative session. It largely found that a slightly improved economic outlook for Minnesota and the nation is expected to increase state revenues, while uncertainties about federal funding could have major impacts on the state budget.
Projected Surplus Grows by $1.3 Billion
For the current two-year budget cycle, which runs through next June, the report projects a surplus of about $3.7 billion. That is up $1.3 billion compared to the previous revenue forecast issued in November.
Long-Term Structural Deficit
The report also forecasts a state fund balance of $377 million for the following biennium, but a large structural imbalance remains. Through the end of June 2029, it projects a structural budget deficit of more than $3.3 billion after inflation, with revenues predicted to grow by about 1.9% and total state spending increasing by 2.2%.
The state agency also listed a number of economic and revenue risks that could impact the budget forecast. They include uncertainties concerning tariffs and immigration, incomplete statistical data, inflation, and volatility in the stock and bond markets.
Risks Posed by Federal Funding Uncertainties
In addition, the report lists risks associated with federal spending, noting that Minnesota receives more than $31 billion to support state entitlement programs and that any loss of federal funds would increase state costs. Earlier this week, the Trump administration announced a temporary suspension of nearly $260 million in Medicaid funding for state programs. The report also identifies a risk of financial penalties because the state is currently out of compliance with certain Medicaid provisions.
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