Minnesota has spent more money than it has collected in revenue every year since 2024. A similar trend is playing out in North Dakota. Yet North Dakota is likely to prioritize spending cuts to fix this structural imbalance, setting itself further apart from increasingly unsound fiscal policies taking hold in Minnesota.
Mainly due to falling revenues, the Peace Garden State saw revenues exceed spending by $226 million in 2025. According to the data, revenues declined by 15 percent in 2025. Spending also went down, but not enough to offset revenue changes. Based on legislative appropriations, the 2025-27 biennium has an estimated gap of over $900 million.
To tackle this issue, North Dakota’s governor, Kelly Armstrong, has stressed the need to cut spending and match expenses with ongoing revenues.
…We have a balance problem in our state budget. The growing gap between our ongoing revenues and ongoing expenditures is a slow-building storm, and we need to start correcting deficit spending in the general fund.
Under the guidelines he has provided to government Agencies, the governor mentions no tax hikes. Instead, his plan relies on spending cuts.
The guidelines call on agencies with general fund budgets of less than $10 million to prepare a hold-even budget. Agencies with budgets between $10 million and $20 million must identify base budget reductions of 3%, while agencies with budgets over $20 million must identify base budget reductions of 10%. In addition, agencies that fall within the hold-even or 3% categories must submit an additional 3% reduction package as a contingency against potential revenue shortfalls due to volatile energy markets..
In Minnesota, where deficits are largely due to ever-rising expenditure, the rhetoric is different.
In his supplemental budget, Governor Walz proposed raising taxes by over half a billion dollars between 2026 and 2029. Including new taxes, Walz’s budget reduces spending, on net, by a mere $372 million. This is less than 6 percent of the 2026-29 deficit.
Walz is not alone in calling for tax hikes. Members of the legislature have also introduced various bills to raise spending and taxes. One notable proposal is a wealth tax on Minnesotans with more than $10 million.
To the extent that rhetoric reflects what ultimately gets done, Minnesotans need to be concerned about what doubling down on destructive tax hikes means for long-term budget sustainability and the state’s competitiveness, especially as other states continue to cut taxes.
