Minnesota legislators will find out Thursday whether a future projected budget deficit of $5 billion has grown or shrunk.
Will Minnesota’s projected budget deficit grow? State officials to unveil new forecast Thursday.
Much has changed at the federal level since the state’s last economic forecast projected a $5.1 billion deficit in the 2028-2029 biennium.
The Minnesota Star Tribune
March 6, 2025 at 12:00PM
State budget officials will present Minnesota’s latest economic forecast, setting the stage for spending discussions at the Capitol. The Legislature must work with Gov. Tim Walz to pass a new two-year state budget by its May 19 adjournment deadline.
The last economic forecast, released in early December, projected a $616 million surplus for the next two-year budget cycle, followed by a $5.1 billion deficit in the 2028-2029 biennium. State Budget Commissioner Erin Campbell urged legislators then to “take the long view” when setting the next budget.
Skyrocketing costs of long-term care for people with disabilities and special education for students were the biggest drivers of the projected deficit.
Walz and DFL legislative leaders framed the budget situation as largely unavoidable, the result of an aging population and more people needing services.
But Republicans blamed DFLers for spending most of the state’s previous $17 billion surplus. Democrats used the historic surplus in 2023 to pass a nearly $71 billion two-year budget, the largest in state history. It included some one-time spending as well as new programs that grew the state budget.
The state’s next two-year budget is expected to be closer to $66 billion without the one-time expenses.
Much has changed since the last economic forecast, particularly at the federal level. President Donald Trump has laid off federal workers, imposed tariffs on the country’s biggest trade partners and attempted to broadly freeze federal spending.
U.S. House Republicans advanced a budget package in late-February that proposes steep federal spending cuts, which could affect Medicaid funding. Federal cuts could worsen Minnesota’s turbulent budget outlook.
The federal government is projected to spend about $11.3 billion on Minnesota’s Medicaid program in the current budget year, according to state reports.
Walz and legislators will have to make hard decisions if the projected deficit holds or worsens. The governor released a budget proposal in January that would substantially reduce projected state spending on Medicaid waivers for low-income Minnesotans with disabilities.
They say the law, scheduled to take effect Jan. 1, puts an undue burden on employers.
