Minnesota forecast now shows $3.7B 2026–27 surplus; structural gap looms
Minnesota Management and Budget now projects a $3.715 billion general‑fund balance for 2026–27—about $1.3 billion higher than the November estimate—and has revised the 2028–29 outlook to a $377 million shortfall (improved from nearly $3 billion projected earlier). The swing reflects stronger‑than‑expected income and sales tax receipts, revised federal assumptions and updated spending baselines, but MMB warns of a structural imbalance ahead amid federal funding uncertainties and rising health‑care costs, prompting partisan debate over one‑time relief versus longer‑term fixes.
📌 Key Facts
- MMB’s updated point estimate puts Minnesota’s 2026–27 general‑fund balance at $3.715 billion, about $1.3 billion higher than the November 2025 projection of roughly $2.4 billion.
- The improvement is driven largely by stronger‑than‑expected income and sales tax collections, revised federal assumptions, updated spending baselines and national economic assumptions.
- MMB now projects a 2028–29 shortfall of about $377 million but explicitly warns of a structural imbalance if spending continues on current trajectories; rising health‑care costs and other out‑year pressures are cited as key drivers of the longer‑term gap.
- Earlier forecasts and edits varied widely — a March forecast showed roughly a $6 billion 2028–29 shortfall, and a December/earlier estimate had been near $3 billion — and post‑session changes briefly lowered the out‑year gap to about $1.1 billion before subsequent federal changes.
- The forecast was prepared with incomplete federal‑program data because of recent DHS/USDA funding fights and shutdown‑related reporting gaps; MMB cautions those federal developments could shift the numbers again.
- Political reactions split: GOP leaders (including Speaker Lisa Demuth and Rep. Harry Niska) are using the new numbers to press a tax‑cut agenda (e.g., exempting tips and overtime), while DFL leaders and Gov. Tim Walz characterize the surplus as a one‑time cushion and warn against new permanent spending without addressing the structural gap; Walz also pointed to uncertainty from federal tariffs and health‑care changes while saying the state’s budget remains on solid footing.
📊 Relevant Data
In 2023, the poverty rate for White Minnesotans was 6.7%, compared to 28.6% for Black Minnesotans, 31.3% for American Indian Minnesotans, 14.1% for Hispanic Minnesotans, and 12.0% for Asian Minnesotans.
Poverty Rates in Minnesota — MN.gov
Foreign-born Minnesotans contributed $6.2 billion in state and local taxes in 2023, compared to their population share of about 9% of the state's residents.
Minnesota's Office of New Americans — MN.gov
In 2023, per capita welfare consumption for major programs was $1,602 for Hispanic immigrants, compared to $1,853 for non-Hispanic White natives and $3,342 for Black natives in the United States, with Minnesota following similar national trends.
Immigrants Still Use Much Less Welfare Than Native-Born Americans — Alex Nowrasteh
From 2020 to 2024, immigration accounted for 94% of Minnesota's net population growth, contributing to economic gains through labor force participation and tax revenues.
Report: Immigrants Drive Economic, Population Gains in Minnesota — TCB Magazine
Minnesota's foreign-born population grew by 15% from 2013 to 2023, with significant contributions to occupations in high demand, supporting economic growth amid a tight labor market.
The Growth and Impact of Minnesota's Foreign-Born Workforce — MN.gov
In 2023, Minnesota spent nearly $46,000 on welfare per person in poverty, the second-highest in the nation, with disparities in usage linked to demographic groups experiencing higher poverty rates.
In 2023, Minnesota spent nearly $46,000 on welfare per person in poverty — American Experiment
📰 Source Timeline (4)
Follow how coverage of this story developed over time
- Confirms MMB’s updated point estimate of a $3.715 billion general‑fund balance for 2026–27, about $1.3 billion higher than the November 2025 projection.
- Details that the swing is driven largely by stronger-than-expected income and sales tax collections and revised national economic assumptions, while interest‑rate and tariff uncertainty still cloud the out‑years.
- Quotes Speaker Lisa Demuth and Rep. Harry Niska using the new numbers to argue for their tax‑cut agenda — specifically exempting tips and overtime from state income tax — while DFL leaders and Walz’s team frame the surplus as a one‑time cushion that should not justify new permanent spending without addressing the structural gap.
- Spells out that the 2028–29 biennium still shows a projected $377 million shortfall and that MMB officials explicitly warn of a structural imbalance if spending continues on current trajectories.
- Notes that the forecast was built with incomplete federal‑program data because of the recent DHS/USDA funding fights and shutdown‑related reporting gaps, which MMB cautions could shift numbers again if Washington changes course.
- Minnesota’s projected general‑fund balance for the 2026–27 biennium is now about $3.7 billion, up roughly $1.3 billion from the prior November estimate of $2.4 billion.
- The 2028–29 outlook has improved from a nearly $3 billion projected deficit to a much smaller projected shortfall of about $377 million, though MMB still flags a 'structural imbalance.'
- The article details that stronger‑than‑expected revenues, revised federal assumptions and updated spending baselines account for most of the change, and it captures updated partisan reactions to the new numbers.
- MMB’s new forecast pegs the 2028–29 biennium shortfall at nearly $3B, with rising health care costs cited as a key driver.
- Near‑term surplus is updated to about $2.4B, roughly $549M higher than the prior estimate.
- Gov. Tim Walz’s on‑the‑record statement links uncertainty to federal tariffs and health‑care changes while asserting Minnesota’s budget remains on solid footing.
- Context added: a March forecast showed a ~$6B shortfall for 2028–29, and the June special session cut the biennial budget from $72B (2023 plan) to $66B.
- Article notes post‑session estimates briefly lowered the out‑year shortfall to about $1.1B before federal changes were factored in.