Minnesota’s economists have released their latest fiscal projections for current and future budget cycles, and District 21A Rep. Joe Schomacker of Luverne said the data finds both positive and negative trends.
Schomacker, a Republican, noted that the current budget cycle finds a budget surplus, yet in the next budget cycle a deficit by an almost identical amount would need to be addressed.
For the 2024-25 biennium, the Minnesota Management and Budget (MMB) Office says Minnesota is now projected to see a budget surplus of $2.4 billion, which is up $808 million from the end-of-session estimate. Higher than expected consumer spending and corporate profit growth are the main reasons for the tax revenue forecast. The near-term U.S. economic outlook has improved since February, driven by stronger than expected consumer spending, business investment and employment.
However, higher estimates in health and human services and education raise the total amount of spending, which MMB believes will create a negative structural balance in the next biennium. According to the data, Minnesota is now projected to see a $2.3 billion budget deficit in Fiscal Year 2026-27.
Schomacker said state spending increased significantly after the legislative majority and Gov. Tim Walz agreed on a budget. Last session, 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.
While the November forecast gives lawmakers an updated roadmap for Minnesota’s economic projections, Schomacker said an update given this February will serve as the official fiscal legislative framework for the 2024 session.