Minnesota's budget surplus could turn into a multi-billion-dollar deficit in the coming years, state officials warned yesterday.
By the numbers: Higher-than-expected tax payments helped drive a $2.46 billion surplus for the two-year spending plan approved in June, state officials say.
But increased costs and a projected slowdown in economic growth could leave the state nearly $3 billion in the red in the 2028-2029 budget.
Threat level: If the projections hold, lawmakers will eventually have to cut spending, increase revenues or tap the state's rainy day fund to balance the budget.
Between the lines: While tariffs and other federal decisions impact the state's bottom line, growth in spending on health care and other state programs is a bigger factor, state officials say.
What we're watching: Gov. Tim Walz said an independent audit due early next year will give officials a fuller picture of the cost of fraud targeting social services programs.
Those programs are funded in part by federal dollars.
The bottom line: "Good decisions" to cut spending and leave money on the table this year "blunted the impact" of the state's "structural imbalance," Minnesota Management and Budget commissioner Erin Campbell said.
"At some point that will catch up to us, and that looks to be in the next biennium."
