MN budget surplus down to $456M for 2026-27, expenses expected to outpace revenue in 2029

ST. PAUL, Minn. (FOX 9) - Two years after seeing a record-setting projected surplus of $17.5 billion in 2023, Minnesota’s lawmakers learned in December that they would be faced with a projected $616 million balance at the end of the Fiscal Year (FY) 2026-27, according to a forecast provided by Minnesota’s Department of Minnesota Management and Budget (MMB).

But the latest update provided on Thursday says the coffers will be even tighter in the years ahead for Minnesotans.

Watch live:

Officials will hold a press conference at 12:30 p.m. Watch it live in the player above. 

Minnesota’s budget surplus declining

What we know:

Minnesota’s MMB produces statewide budget forecasts based on state income and sales tax revenues, combined with spending initiatives.

In December, MMB forecast a $616 million balance at the end of FY 2026-27 – $1.1 billion less than prior estimates.

According to the report provided in December, higher spending throughout the state resulted in a growing imbalance.

But the most recent report paints an ever more dire picture.

The latest Fiscal Year 2026-27 projected balance is now $456 million, according to MMB – $160 million lower than prior estimates.

The nonpartisan report that is often used as a playbook for crafting the upcoming two-year budget, known as a biennium, cites higher inflation causing increases in expected expenses.

The report also predicts that spending growth will outpace revenue in FY 2029. 

The projected general fund shortfall for the FY 2028-29 biennium is now $5.995 billion, $852 million more than the most recent previous estimates, MMB says.

Past projections

Dig deeper:

In February 2024, MMB forecast a $3.7 billion budget surplus by the end of fiscal year 2025, and $2.2 billion after 2027.

But investments in K-12 education and transportation followed the record-setting $17.5 billion budget surplus the year before.

Due to additional spending of the surplus, and the most recent budget outlook, priorities that were one-time spending could no longer be funded during a new budget cycle.

In the past, Minnesota GOP lawmakers have argued the DFL went on a "reckless and irresponsible spending spree," that is now leading the state into the red.