Minnesota's projected 2028-29 deficit grows to $5.99 billion
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Minnesota could face a budget shortfall of nearly $6 billion in the coming years, state economists project.
Why it matters: The warning, issued as part of Thursday's state budget forecast, will shape bipartisan budget negotiations at the divided Capitol this spring.
- Lawmakers from both sides acknowledged at news conferences that cuts and changes to curb projected growth in spending will be needed.
Driving the news: The forecast still shows a $456 million surplus for the upcoming two-year budget, which covers the 2026-2027 fiscal year.
- That's down $160 million from the estimate released in December.
Yes, but: If lawmakers spend down that surplus and the state continues on its current trajectory of spending and revenues, a $5.99 billion deficit could loom over the 2028-29 budget.
Threat level: Potential federal spending cuts and policy coming out of Washington affecting everything from inflation to immigration could dig an even deeper hole.
- One-third of the state budget, roughly $45 billion, comes from federal funds.
- Minnesota Budget commissioner Erin Campbell said such cuts could have a "really devastating" impact on the budget.
Friction point: Democrats sought to blame President Trump's first weeks in office for the bleak outlook, saying his tariffs, spending freezes and potential cuts to Medicaid are causing "chaos" and uncertainty.
- Republicans said DFL lawmakers are responsible for spending down a $17 billion surplus in the budget they passed when they had full control.
Reality check: While the forecast does reflect a threat of higher inflation as a result of federal actions, the bulk of the projected structural deficit, some $5 billion, was also included in the November forecast that was issued before Trump's policies started to affect the economic outlook.
- Longer-term growth in costs for education and disability services — not just the one-time and ongoing spending included in the last budget adopted by DFL lawmakers — are key factors driving the gap.
The bottom line: Lawmakers have until June 30 to pass a balanced budget for the next two years.