Minnesota's projected budget surplus shrinks to $616 million
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Minnesota budget officials are cautioning of a "growing structural imbalance" that could put the state in the red in future years.
The big picture: While state economists are projecting a $616 million surplus at the end of the next two-year budget cycle, spending is on track to outpace revenues by $5.1 billion in 2028-2029 fiscal years.
Why it matters: These numbers will guide the debate over Minnesota's next two-year budget — and whether cuts or new revenue are needed to avoid a deficit if the projections come to bear.
Zoom in: The shrinking surplus and potential shortfall down the line are the result of an expected drop in tax revenue and growth in spending on long-term care and special education, Minnesota Management and Budget officials say.
- The projection also accounts for about $2.2 billion in spending increases due to inflation, which must be factored into the forecast following a recent change in law.
State of play: The budget will need bipartisan support, given the return to divided government next year.
- The November election resulted in a rare 67-67 tie in the House, ending the DFL's trifecta after two years. Election contests filed in two races won by Democrats are still ongoing.
- Democrats maintained their one-vote majority in the Senate and DFL Gov. Tim Walz remains in office following his failed vice presidential run.
Flashback: The numbers represent a big shift from the 2023 budget cycle, when the state's surplus topped $17 billion.
Yes, but: That surplus, which was spent down by majority Democrats as part of the current two-year budget, was made up largely of one-time funding, including money left on the table in the previous session.
The catch: As always, this forecast is just a projection. Factors ranging from the broader economy to changes made by the Legislature this session could prompt big changes to the balance sheets.
What we're watching: State economists will release an updated budget outlook in February.
- Lawmakers have until July 1 to reach a spending agreement.
Editor's note: This story has been updated with additional details about the budget forecast.