State Budget Forecast Shows Projected Surplus Shrank $1 Billion

ST. PAUL (WJON News) -- The latest economic forecast just released Wednesday shows what Minnesota officials term "a growing structural imbalance" in the state budget "throughout the... planning horizon"

Officials predict a 616-million-dollar balance at the end of the fiscal year 2026-27 biennium -- 1.1 billion dollars less than prior estimates.

They say it's due to projected reductions in income and sales tax revenues, plus higher spending for long-term care and special education.

The report also projects a budget deficit of more than $5.1 billion for the 2028-29 budget cycle.

Governor Tim Walz struck an optimistic note yesterday afternoon, before the forecast release.

"I think we're solid. ...we always make sure we're fiscally responsible. We're Triple-A bond rated. I expect it to be good."

When lawmakers return to the State Capitol next month, they not only must make any necessary adjustments in the current budget for 2024 and 25, but also set the entire budget for 2026-27.

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Walz and legislative leaders weigh in on the latest economic forecast this afternoon.

House Speaker Melissa Hortman released the following statement about the state’s new economic forecast.

“Today’s forecast shows a $3.7 billion surplus in the current biennium, a $616 million positive balance in the upcoming budget cycle, and our highest budget reserve fund balance – another $3.5 billion – to date.

“Over the last 10 years, DFL leadership has led to budget surpluses and large reserves. As we look ahead to the next Legislative Session, DFLers will continue focusing on supporting workers and families, because we know that’s the best way to build a strong economy.

“While the long-term budget forecast shows reasons for concern, it is the job of the Governor and Legislature over the next two years to balance in the near-term and prepare for the long-term. We will do what we always have done – which is to make responsible and sustainable commitments to Minnesotans – from preschoolers to nursing home residents.

“While corporate profits continue to soar, Minnesota workers are not receiving their fair share of the wealth they create. We have to focus on lowering costs, reducing stress in people’s lives, and building an economy with jobs that have wages and benefits that can support a family.

“In a tied House, we need to and will operate in a bipartisan fashion to get our work done. We are prepared to work together with legislators on both sides of the aisle who are willing to collaborate and compromise.”