Gov. Tim Walz proposes additional spending cuts in revised budget plan

Gov. Tim Walz revised his two-year budget plan on Friday, proposing additional spending cuts this year and into the future to respond to a growing projected deficit.

The $250 million in new cuts, proposed for the 2028-2029 budget, come through the reduction or elimination of dozens of programs and grants across state government. That includes facilities maintenance funding for charter schools, reducing some aid for transit in greater Minnesota and the elimination of a state tax rebate program for political contributions.

Walz’s updated proposal cuts $162 million in the 2026-2027 budget he and lawmakers must craft this year.

In early March, state budget officials said Minnesota’s projected surplus for the next two years had shrunk to $456 million, while the anticipated deficit in the 2028-2029 biennium increased from $5.1 billion to $6 billion.

“By addressing the budget challenges we face today, we’re setting Minnesota up for long-term success and protecting the resources necessary to make Minnesota the best state to live, work, and raise a family,” Walz said in a statement.

His budget also boosts one-time spending to respond to bird flu and continues some funding for a law enforcement training program through the Philando Castile Memorial Training Fund, which was created in 2021 as part of a bill that established new requirements related to use of force.

Republicans were critical of the administration for leaving the $6 million in law enforcement funding out of the governor’s initial two-year budget plan.

Walz’s roughly $66 billion budget proposal leaves $2 billion on the bottom line in the current two-year budget, according to a release from his office.

The governor kept many of the marquee measures in his original budget rolled out in January, including a pitch to lower Minnesota’s 6.875% state sales tax rate to 6.8%. The difference between the two tax rates equates to 7.5 cents for every $100 spent.

It expands the sales tax to cover so-called “wealth services” provided by investors, bankers and lawyers that were previously excluded. Republicans in the Legislature pushed back on expanding the tax to services that were previously exempt, noting the change would bring more tax revenue into the state and equate to a tax increase.

House Republicans criticized Walz’s new budget for “minor reductions in spending in the face of a looming deficit,” while continuing to propose tax increases that won’t pass the chamber.

“There is a lot of work still to be done if this is where Democrats are starting,” read a statement from House GOP leadership.

Walz’s budget also substantially reduces projected state spending on Medicaid waivers that serve more than 70,000 low-income Minnesotans with disabilities. The waivers cover a wide range of services that help people survive and live more independently.

The proposal wouldn’t decrease the number of people getting waivers, but it would cap automatic increases for inflation in the waiver program at around 2%.

The budget also cuts state funding to private schools and includes a 5% reduction in reimbursement costs to counties for special education transportation.

Passing a state budget is the main item on the agenda for the remainder of this year’s legislative session. The governor is required by state law to propose his plan first and update it after the new forecast is released in February or March.

Walz must craft a budget deal with a Legislature that’s narrowly divided between the two parties. They face a July 1 deadline to strike a deal or risk shutting down government services.