ST. PAUL – Minnesota’s financial experts recently provided an economic update for our state, and State Representative Bjorn Olson (R-Fairmont) said the analysis included pros and cons.
“The good news is Minnesota does have a budget surplus for the upcoming budget cycle, albeit much smaller than originally predicted,” Olson said. “The bad news is a significant budget deficit is projected for the following budget cycle.”
In February, Minnesota was expected to see a $1.7 billion budget surplus for the upcoming 2026-27 biennium. But due to projected reductions in income and sales tax revenues and higher spending for long-term care and special education, only a $616 million positive balance remains. Of the $1.1 billion projected decline in revenue, $926 million of amount is based on a new inflation estimate that is now required in future budget forecasts.
Olson said the fiscal problems begin in Fiscal Year 2028-29. Minnesota’s fiscal analysts note for that budget cycle, a $5.1 billion budget deficit is expected. An inflation estimate of $2.231 billion is included in that analysis.
Olson noted that state spending increased significantly after the legislative Democrat majority and Governor Walz agreed on a budget last session. At that time, Minnesota had a nearly $20 billion budget surplus before inflation was automatically included in our state’s budget forecast projections. In addition to spending the surplus, the majority party also voted to raise taxes by another $10 billion. By the time session ended, Minnesota’s budget spending increased by 40% when compared to spending in the previous two-year budget cycle.
“No one should be surprised we will soon be approaching the edge of a fiscal cliff,” Olson said. “Democrats spent tens of billions of dollars in revenue and grew state government programs by 40%. Common sense tells you that kind of budgeting will soon lead to expenses outpacing incoming revenues, and that’s exactly what is projected to happen in two years.”
While the November forecast gives lawmakers an updated roadmap for Minnesota’s economic projections, Olson said an update given this February will serve as the official fiscal legislative framework for the 2025 session.