Walz budget seeks $370M cut, sales‑tax trim, surge aid

Gov. Tim Walz has released his 2026 supplemental budget proposal, calling for $370 million in state spending cuts by FY 2029 while pairing them with a small statewide sales‑tax reduction and new money aimed squarely at Metro Surge fallout and Medicaid fraud. The plan would cut the general sales tax rate by 0.075% — touted as the first sales‑tax cut in state history — while expanding the Dependent Care Tax Credit by raising eligible expenses by $3,000 for one child and $6,000 for two or more kids under age 5, a direct pocket‑book issue for Twin Cities families. Walz proposes rental support and small‑business loans for people and businesses hit by Operation Metro Surge plus a $10 million fund to respond to future surge impacts, even as he talks up tougher gun laws, including an assault‑weapons ban and a fix to the state’s ghost‑gun loophole. On the fraud front, the budget would pour more money into DHS fraud‑detection and IT overhauls and beef up staffing in the Attorney General’s Medicaid Fraud Unit — the same systems now under fire for UCare’s collapse and CMS’s Medicaid deferrals. He also wants a new council on the future AI economy and a tax on social‑media tech companies, while claiming the package reduces the state’s projected structural deficit by about 20% and leaves a $1.8 billion balance in the 2028–29 biennium; how much of this survives the Legislature will determine what actually hits Twin Cities wallets and services.