ST. PAUL 鈥� The Minnesota Management and Budget office on Thursday said the state鈥檚 looming deficit is now projected at $6 billion, $1 billion higher than November estimates.
Minnesota Management and Budget officials said during a February Budget Forecast review on Thursday, March 6, that Minnesota鈥檚 estimated deficit for the 2028-29 fiscal year had risen in the last three months. The said the state would hit a $5 billion deficit for 2028-29, but that number is now expected to reach $6 billion.
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MMB Commissioner Erin Campbell said a main factor for the $6 billion deficit was state spending that continues to outpace revenue. Campbell also cited 鈥渋nflationary pressures" at Thursday鈥檚 forecast review.
Ahna Minge, state budget director with MMB, said Thursday's projections could change based on how the state completes the 2024-25 fiscal year and how allocations are made as the Legislature completes the 2026-27 budget.
鈥淚t is really important to emphasize that this money doesn鈥檛 go automatically to programs; it has to be appropriated by the Legislature,鈥� she said. 鈥淧olicymakers have the choice, the discretion, to address inflationary pressures to spend this money on something else or to leave it unspent.鈥�
The two largest projected areas of spending for the state鈥檚 2026-27 budget are education at $26 billion and Health and Human Services at $24 billion, according to Thursday鈥檚 projections.
The state鈥檚 projected surplus for 2026-27 has also changed since MMB鈥檚 last update. The expected surplus for fiscal year 2026-27 is down to $456 million, $160 million lower than of $616 million.
During the Legislature鈥檚 last budget session in 2023, Minnesota was working with an and approved a budget of $72 billion , a jump from the previous $52 billion budget.
Elected officials weigh in
Gov. Tim Walz on Thursday again stood in defense of state spending decisions made by the Legislature in 2023.
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鈥淚鈥檒l say what I stood here in November and said, and it holds true maybe more so now: Minnesota has put our money into things that invested to improve people鈥檚 lives, public education, tax cuts for the middle class, feeding our kids education and innovation in our business community,鈥� he said.
Speaker Emeritus Melissa Hortman, DFL-Brooklyn Park, said the forecast review was an important step in creating a sustainable budget for the state, while also pointing to federal changes.
鈥淭oday鈥檚 near and long-term economic forecast is helpful and necessary for the Legislature and the governor to put together a state budget 鈥� but there are irresponsible cuts that are proposed at the federal level that will swamp everything we鈥檝e done here,鈥� she said.
Senate Majority Leader Erin Murphy, DFL-St. Paul, also directed blame toward Washington.
鈥淥nly one thing has changed since the November forecast, and that is the inauguration of President Donald Trump,鈥� she said.
Leader Harry Niska, R-Ramsey, condemned Democrats鈥� finger-pointing to the federal level and pointed instead to Democrats鈥� spending choices in the last budget cycle.
鈥淒emocrats have tried to distract and deflect from their failed record,鈥� he said. 鈥淭hey want to talk about everything else, other than what鈥檚 happening in our Minnesota budget ... in our Minnesota as a result of Minnesota policies. But the reality is, and what we see in the budget forecast, is that our fiscal house is out of order at the state level, and it鈥檚 out of order because our state economy is fundamentally out of balance.鈥�
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Lawmakers on Thursday were hesitant to specify potential areas for cuts in their budget proposals, which are set to be due at the beginning of April, but Republicans said they鈥檙e looking at areas of waste, fraud and abuse.
Democrats did not give any specifics, but Murphy said they are still looking at everything and that their objective is to 鈥渂alance the budget, to balance it out for the people of Minnesota, and to protect Minnesotans, particularly against the harms that they're coming our way from Washington, D.C.鈥�
A balanced budget must be passed by the Legislature and signed by Gov. Tim Walz by July 1 to avoid a full or partial government shutdown with services restricted.
Federal impacts
Campbell said that Thursday鈥檚 full potential federal cuts from the U.S. House鈥檚 budget proposal, which proposes almost $2 trillion in spending cuts over a 10-year period and up to $880 billion in Medicaid cuts.
鈥淲ant to underscore that, like other states, we are closely monitoring unprecedented changes at the federal level, changes that are still very much in flux,鈥� she said.
Under the current operating budget for 2024-25, the state has a total of $119 billion in revenue, with 34% coming from federal funds. In 2025 alone, the state has budgeted $23 billion in federal funds 鈥� including $11 billion for Medicaid 鈥� according to MMB鈥檚 before the Senate Finance Committee.
Minnesota State Economist Anthony Becker said Thursday that recently imposed tariffs from Trump鈥檚 administration are not factored into the state鈥檚 budget projects. Becker said, however, tariffs and spending cut proposals pose 鈥渞isk鈥� to the state鈥檚 budget.
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鈥淭he possible effects of proposed tariffs and immigration policies could put upward pressure on prices and wages, threatening the forecasted monetary policy path, and high federal deficits and national debt could weigh negatively on economic growth in the long term,鈥� he said.
Campbell echoed that the uncertainty from federal funding, which comprises almost a third of the state鈥檚 current budget, could be 鈥渄evastating.鈥�
鈥淭hat鈥檚 an enormous amount of money, and if federal action meant that, we would lose those resources, the impact of the state budget is really devastating,鈥� she said.
This story was updated at 5:56 p.m. on Thursday, March 6, 2025.
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