Minnesota’s financial trajectory has shifted dramatically from a $19 billion surplus to a projected $6 billion deficit for the 2028–2029 budget cycle, sparking intense debate over fiscal management and spending priorities.
At a Glance
- Minnesota’s budget moved from a $19 billion surplus to a projected $6 billion deficit for 2028–2029
- A modest $456 million surplus is projected for the upcoming two-year budget cycle
- Expenditures are expected to outpace revenues in the coming years
- Potential federal cuts, especially to Medicaid, could exacerbate the deficit
- Lawmakers are divided on the causes and solutions for the fiscal downturn
A Stark Financial Reversal
Minnesota’s budgetary landscape has undergone a significant transformation. After experiencing a record $19 billion surplus in 2022, the state now faces a projected $6 billion deficit for the 2028–2029 biennium. This shift has raised concerns among lawmakers and citizens alike, as reported by the Star Tribune.
Watch Minnesota Management and Budget’s press conference discussing the latest budget forecast.
Factors Contributing to the Deficit
Several elements have contributed to this financial downturn.
One key driver is the state’s rapid increase in spending. Minnesota’s two-year budget now totals $71.5 billion, representing a 40% increase over the previous budget period, according to the Star Tribune.
Another concern is Minnesota’s heavy reliance on federal funding. Roughly one-third of the state budget comes from federal sources, especially Medicaid. If federal spending is reduced—particularly as COVID-era funding dries up—the state could lose as much as $1.6 billion, as noted by Axios Twin Cities.
Political Responses and Debates
The fiscal challenges have fueled sharp partisan debate.
Republican leaders, including House Speaker Lisa Demuth (R-Cold Spring), have slammed the Democratic majority for engaging in what they describe as an “irresponsible spending spree.” The conservative outlet The Federalist criticized the Walz administration for failing to rein in spending even as revenue growth slowed.
Democrats, however, argue that external forces are largely to blame. Governor Tim Walz has pointed to increasing costs in special education and long-term care, as well as instability in federal policy. “There is a storm at the federal level, and that storm is Donald Trump,” Walz said in a pointed response. House DFL leader Melissa Hortman echoed the sentiment, saying, “Donald Trump is wrecking our economy,” according to the Star Tribune.
Proposed Measures and Outlook
In light of the deficit forecast, Walz has begun suggesting rollbacks and reallocations. Proposals include scaling back Medicaid waivers and reviewing agency spending, though many Democrats remain hesitant to cut previously promised programs. State agencies have been asked to submit ideas for budget reductions, per CBS News Minnesota.
Watch Minnesota lawmakers discuss budget implications.
Lawmakers have until May 19 to pass the next biennial budget or risk triggering a special session. The revised two-year budget is expected to total around $66 billion. If federal cuts are announced after the state budget is finalized, additional sessions may be necessary to cover the shortfall, as outlined by the Minnesota Reformer.
Broader Context
Minnesota does retain financial cushions. The state holds more than $3 billion in a budget reserve, and Senate Majority Leader Erin Murphy has suggested it may be tapped to offset the most urgent needs, particularly in healthcare if federal Medicaid reductions go into effect, according to the Minnesota House.
Critics point to administrative missteps as a further concern. A $113 million overpayment error by the Department of Human Services must now be repaid to the federal government, while recent scandals—like the $250 million Feeding Our Future fraud case—underscore calls for greater program oversight.
Governor Walz once admitted, “90% of the time, I can be really good, but about 10% of the time, I can be a train wreck.” For his critics, this budget crisis may embody that self-confessed 10%.
As Minnesota lawmakers navigate high-stakes decisions over funding and fiscal restraint, the outcome will shape public services and political dynamics for years to come. What began as a budget surplus success story now serves as a cautionary tale of how quickly a state’s fortunes can reverse.
