Minnesota’s fiscal predicament is a bipartisan problem with bipartisan solutions

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If you follow state politics, you have probably heard that Minnesota’s fiscal outlook has dimmed. After a $17 billion surplus in 2023, state spending is forecasted to outpace revenues by 5%, leading to a tight surplus in 2026-27 and a deficit as large as $5 billion by the end of the 2028-29 biennium.

Nothing will stop Republicans from claiming an emphatic “I told you so” and blaming the DFL for overspending, but that’s dishonest. The truth is that Minnesota is wrestling with demographic challenges that will soon hit every state in the nation, and the wise policy decisions that created our emerging budget shortfall were largely bipartisan. The solutions can be bipartisan as well.

Although the evaporating surplus might create the appearance of mismanagement, most of it was accrued from rolled-over savings and federal COVID-19 aid. As multiple state budget directors have already concurred, this one-time windfall couldn’t have done much about long-term trends.

The largest cost growth is in long-term care, resulting from an aging population and two bipartisan policies aimed at supporting seniors and disabled Minnesotans: In 2015, the Legislature uncapped the number of enrollees eligible to receive care at home, which saves the state money compared to pricier nursing facilities. Pay raises for the domestic support professionals that provide this care also received bipartisan votes in both 2021 and 2023.

More Minnesotans are now getting the care they need, and essential workers are no longer receiving poverty wages. That’s a good thing.

The other major cost growth is in special education. In 2023, the state agreed to cover a larger share of these services to make up for the absence of promised federal funds. These costs are rising along with the number of students who require them, and as special education professionals receive better — but still low — pay.

Together, these areas represent over 90% of planned spending growth during the 2028-29 biennium. To avoid these investments would have been to balance the budget on the backs of workers and schools. That would hurt Republican and Democrat districts alike.

On the revenue side, heaping blame on the DFL is even less justifiable: In 2023, the DFL passed a net tax cut costing $1.3 billion in 2026-27, while the GOP proposed ongoing cuts totaling over $4.2 billion on top of one-time rebates of $8.5 billion. The fact is that our emerging fiscal challenges would have been far worse under Republican control.

But that’s not to say the DFL did everything perfectly.

One change Republicans would not have made was to make our tax code more progressive. And here, although the goal of shifting taxes from the poor to the rich is admirable, there’s a legitimate argument that DFL actions weakened our fiscal position.

By raising more money from the volatile top end of the income spectrum, the state increased reliance on an income source that is now declining relative to recent highs. Fiscal experts saw this coming, and the GOP could cry mismanagement if not for the fact that they are equally critical of more stable “regressive” taxes that take a larger share from lower-income households.

All of this is to say that finger-pointing over budget decisions belies deeper shared interests and unavoidable realities. Our society is aging and its needs are growing. In 2023, I wrote that Minnesota should “spend every penny” of the surplus, and while I might nitpick some decisions, I stand by that statement.

Minnesota invested in the urgent needs of our residents and we are well-positioned to maintain those commitments moving forward. With inflation and school funding increases factored in, our budget forecast is now a much more honest reflection of the costs and needs of the state. The predicted deficit will not materialize for another 4½ years, and the investments passed in 2023 have just barely begun to kick in.

For their part, Republicans who talk a big game about waste will have an opportunity to substantiate their claims and help improve trust in government for all. Privatized services, particularly in Medicaid, are one area worth examining. Irresponsible handouts to corporate interests are another. If the GOP can coalesce around some meaningful problems and proposals, it would be good for everyone.

But no amount of savings will negate the need for our continued commitment to funding the essential services that form the foundation of a strong society. Minnesota will have to identify policies to raise the revenues we need to fund the programs that sustain our high quality of life. That must include support for young families that will help stem the tide of our aging population in the first place.

To accomplish all of this, Minnesota will once again have to prove itself “the state that works” and to do that, we must also be the state that works together.

Isn’t that a nice message for the holiday season?

Eric Harris Bernstein is a Minneapolis resident and coalition director of We Make Minnesota. He has a master’s in public policy from the University of California at Berkeley.