Minnesota forecast now shows $3.7B 2026–27 surplus
Minnesota Management and Budget’s February 2026 forecast projects a $3.7 billion general‑fund balance for the 2026–27 biennium, $1.3 billion higher than the state’s November estimate, driven by a slightly better economic outlook and stronger—but more volatile—revenue sources. The out‑years are less rosy: the 2028–29 biennium now shows just a $377 million balance and what officials call a “significant structural imbalance,” with spending growth outpacing revenue through 2029 amid federal policy shifts, shutdown‑related data gaps and broader economic uncertainty. House GOP leaders immediately seized on the stronger near‑term numbers to argue against tax hikes and for a conformity bill that would exempt tips and overtime from state income tax, with Speaker Lisa Demuth saying “tax increases…should be off the table” and Rep. Harry Niska casting the forecast as proof pro‑business policies are the solution to what he labels earlier DFL “fiscal disaster.” For the Twin Cities, this forecast sets the table for 2026 session fights over whether to spend, save or cut—choices that will cascade into local aid, school funding, transit money, and how much of the Metro Surge and Medicaid‑fraud fallout gets patched from the state’s checkbook versus pushed onto local levies. The structural gap on the horizon also means Minneapolis–St. Paul taxpayers should assume today’s surplus is no guarantee against tougher budget medicine later in the decade.
📌 Key Facts
- MMB now projects a $3.7 billion general‑fund balance for FY 2026–27, up $1.3 billion from the November 2025 forecast.
- The 2028–29 biennium projection is a $377 million balance, but the forecast warns a 'significant structural imbalance' remains as spending growth outpaces revenue.
- State officials cite a slightly improved economic outlook and stronger, more volatile revenue sources, while also flagging federal policy shifts and data gaps from shutdowns as major uncertainties.
- House Speaker Lisa Demuth says the forecast should take tax increases 'off the table' and is pushing a tax‑conformity bill to exempt tips and overtime, while Rep. Harry Niska calls the numbers proof that pro‑business policies are needed.
- The forecast will shape 2026 legislative decisions on taxes and spending that directly affect Minneapolis–St. Paul services, schools, transit and local government budgets.
📊 Relevant Data
From 2020 to 2024, over 81,000 new Americans moved to Minnesota, making immigration the primary driver of population change and contributing to workforce and economic growth.
Immigration became the leading component of population growth in Minnesota this decade — Minnesota Chamber of Commerce
In Minnesota, during 2022-2024 average, Medicaid coverage percent at the time of birth was 73.1% for Black women, 61.6% for American Indian women, 47.3% for Hispanic women, 41.7% for Asian/Pacific Islander women, and 24.7% for White women, while Black residents make up about 7% of the state's population and White residents about 78%.
Medicaid Coverage by Race/Ethnicity: Minnesota, 2022-2024 Average — March of Dimes
Medicaid spending in Minnesota is projected to grow by $2.3 billion between FY 2026-27 and FY 2028-29, accounting for nearly 80% of general fund spending growth, driven by higher rates for managed care and increased participation.
Budget forecast: Short-term surplus hides a persistent and growing structural deficit — Center of the American Experiment
Minnesota's population grew by 0.6% in 2025 to 5.83 million, with net migration including immigrants contributing to the increase, which impacts state budget through demand for services like health care and education.
Minnesota gained more people from other states in 2025, a first this decade — Star Tribune
Deaths are expected to surpass births in Minnesota soon, making immigration the key driver of population growth unless federal policies restrict it, affecting long-term economic and budget projections.
As Boomers die, immigrants propel Minnesota's population growth — MinnPost
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