Minnesota Minute: State Budget Outlook Update

Minnesota November Budget Forecast

Short-term budget surplus ($2.5B) and long-term budget deficit ($3B)  

The state of Minnesota operates on a two-year budget cycle, otherwise known as a biennial budget. Each odd-numbered year the governor proposes, and the legislature enacts, a two-year operating budget. 

Twice a year Minnesota’s finance and budget agency, the Minnesota Management and Budget Office (MMB), releases a Budget and Economic Forecast known as the November and February Forecasts. The November Forecast serves as a preliminary look at the state’s financial position for the upcoming biennium and beyond as legislators prepare to return to the Capitol for the 2026 Legislative Session. The November Forecast also sets the baseline for the governor’s supplemental budget proposal. The February Forecast serves as a foundation for actual budget decisions once the legislature is in session. 

On December 4th, MMB released the November Budget and Economic Forecast. The Forecast articulated most tax and revenue sources performed better than expected and projected a $2.47 billion surplus for the current 2026-27 biennium. However, it also projected a $2.96 billion deficit for the 2028-29 biennium.

How We Got Here

In 2025, the legislature passed, and the governor signed, a $66 billion state operating budget that sought to close the gap between revenue and spending to make up for a looming deficit in the next biennium. The last state budget forecast released in 2025 projected a $456 million surplus in the current biennium and a roughly $6 billion deficit in next biennium.

In comparison to the last budget forecast release, Minnesota’s budget outlook has improved with a greater surplus in the current budget cycle and less of a deficit than previously predicted for the coming budget cycle, FY2028-2029. MMB characterized the state’s overall budget and economic outlook as “stable” but acknowledged structural budget challenges remain. The state shared challenges for the next biennium are estimated to come from higher health care costs and slow economic growth.

Elected Official Responses

Once state budget officials concluded their presentation on the state’s budget stature, Governor Walz and legislative leaders from each caucus shared their remarks on the unveiled numbers.

Governor Tim Walz

The governor opened his remarks by condemning President Trump’s latest comments targeting the Somali community. The governor confirmed Minnesota stands with its immigrant neighbors and that it is unacceptable to speak that way about any community. Walz acknowledged the state’s financial position is better than previously predicted but recognized there will be challenges over the coming four years. He shared with the media that economic indicators show Minnesota’s economic growth outpaces the national average, largely due to responsible budgeting in his eyes. Reporter questions quickly turned from being focused on the state budget outlook to the state’s government program fraud, federal immigration enforcement agents arriving in Minnesota, and President Trump’s remarks this week regarding Somali and immigrant communities. 

House of Representatives Speaker Lisa Demuth

Minnesota House of Representatives Republican Speaker Lisa Demuth followed with remarks noting this forecast shows the negative effects of massive changes and spending from the 2023 and 2024 legislative sessions when there was full Democratic control in the House, Senate, and governor’s office. Speaker Demuth shared with the media legislative leaders and the governor did a great job last session cutting spending and if they hadn’t fought for those, the deficit would have been nearly 50% more than what it is.

Senate Finance Committee Republican Lead Eric Pratt

The Senate Republican Caucus position was shared by Senator Eric Pratt, the Senate Finance Committee Republican lead. Pratt echoed Demuth’s remarks by noting the state has a structural spending problem for this biennium and next. Pratt shared should the state have implemented the governor’s proposed budget, the state would have pushed billions down onto the state’s counties, resulting in the largest property tax increase in state history.

Senate Majority Leader Erin Murphy

Senate Majority Leader Erin Murphy was the first of the Democratic legislative leaders to comment following the budget forecast overview. Murphy began by condemning President Trump’s remarks on Minnesota’s Somali community and defended the work done by the Democratic trifecta in the 2023 and 2024 legislative sessions. She applauded the foresight of her colleague’s investment in Minnesota when they had the resources to invest in public schools, tax cuts, and food for children. 

House of Representatives Democratic Leader Zack Stephenson 

Minnesota House Democratic Leader Zack Stephenson concluded legislator remarks by beginning with the most notable takeaway from this budget forecast was the health care cost increases families are grappling with, the state budget is also being impacted. Stephenson emphasized House Democrats are focused on lowering the cost of childcare, health care, housing, and more to help Minnesotans address the Trump affordability crisis.

More Information

Details and materials from the announcement:

November 2025 Budget and Economic Forecast Report

MMB Slide Deck – Nov. 2025

Current Operating Budget FY 26-27

Summary of the Current Estimates of State Budget

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