Minnesota’s projected budget surplus has grown to nearly $2.5 billion in the current two-year budget cycle, though an expected shortfall of almost $3 billion remains for the following two years.
The new budget forecast released Thursday by the Minnesota Department of Management and Budget shows a slight improvement over its March forecast, when state officials projected a $456 million surplus in the 2026-2027 biennium and a $6 billion shortfall in 2028-2029.
Growth in the projected surplus is the result of a “better-than-expected fiscal year close and higher near-term revenue collections, partially offset by increased spending estimates,” MMB said in a summary of its November forecast.
“Minnesota’s budget and economic outlook remains stable in the current biennium; however, structural budget challenges remain,” the agency said.
Higher health care costs and slow economic growth remain a challenge for the state later in the decade, according to MMB.
Meanwhile, the state’s general fund reserves remain “strong” and at their statutory target of $3.8 billion.
The updated numbers are a significant improvement over the last major update from state budget officials in March. Then, they warned that “significant near-term economic and fiscal uncertainty” from tariffs and other policy changes under President Trump could hurt the state’s fiscal position.
It’s yet to be seen how federal program cuts might affect Minnesota’s budget in the coming years.
The state was in a much better fiscal position more than two years ago, when MMB projected a nearly $18 billion surplus.
That year, Democratic-Farmer-Labor-controlled state government passed a more than $70 billion state budget that grew spending by nearly 40% — with a lot of the increase coming from one-time spending.
In June, a Legislature divided closely between the DFL and Republicans passed a $66 billion two-year budget, close to $5 billion less than the 2023 budget.
Special education transportation aid is one of the biggest areas for cuts. State leaders said that they’d have to curb spending this year to address shortfalls looming later this decade.
MMB will give a more detailed presentation to the press on its budget forecast at a noon news conference. Gov. Tim Walz and legislative leaders of both parties are also set to deliver remarks on the updated numbers.
The November forecast, typically released in the first week of December, gives Minnesota lawmakers insights on the state’s fiscal picture as they prepare to return to the Capitol for the legislative session early in the following year.
An updated forecast MMB releases in early March is generally when the Legislature begins deciding how it will spend money. Though the state will not have to pass a two-year budget in 2026, as this happens in odd-numbered years.
Past state budgets
Here’s a listing of past state two-year budgets:
• 2023 — $72 billion.
• 2021 — $52 billion.
• 2019 — $48 billion.
• 2017 — $46 billion.
• 2015 — $41.5 billion.
• 2013 — $38 billion.
• 2011 — $35.7 billion.
Check back for updates on this developing story.
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