Yesterday, we learned that Minnesota’s state government was forecast to run a budget surplus for the 2026-2027 biennium of $2.5 billion but a deficit for the 2028-2029 biennium of $3.0 billion.
“There will be some blame game now, as Republicans try to pin the blame on the DFL and the DFL try to pin the blame on the Trump administration,” I wrote:
The Republican argument will be focused on the “structural budget challenges” which MMB refers to, specifically state government spending outstripping revenues. The DFL will base their argument on a slowing economy resulting from federal government policies. Indeed, MMB speaks of “Higher health care costs and slow economic growth [which] drive an increased structural imbalance in the FY 2028-29 planning estimates…”
To asses these rival claims, it is worth explaining, as I did in September, how Minnesota’s budget blew up.
The “trifecta” and its aftermath
In February 2023, Minnesota Management & Budget (MMB) forecast a state government budget surplus of $17 billion for the 2024-2025 biennium. With that forecast in their back pocket, the “historic” DFL trifecta embarked on an orgy of spending in the 2023 session.
Figure 1 tracks fiscal incontinence. We see that, in February 2023, state government spending was forecast to rise from $24.7 billion in 2022 to $27.1 billion in 2027 and $28.4 billion in 2025. After the “trifecta” had done its work, however, the actual figures for 2024 and 2025 came in at $35.3 billion and $34.0 billion respectively, a total increase over the two years of $13.8 billion. This week’s forecast has spending climbing still further, to $37.4 billion in 2029, a 51.3% increase from 2022.
Figure 1: State government spending, forecasts and actual, billions
Revenues have increased also, as Figure 2 shows, but by nowhere near enough to fully fund the “trifecta’s” explosion of spending. In 2024 and 2025 combined, revenues came in $2.3 billion higher than forecast in February 2023 which, obviously, was nowhere near enough to cover the $13.8 billion increase in spending. Revenues are forecast to rise to $34.4 billion in 2029, 12.2% up from 2022, but this will not be enough to cover forecast spending; indeed, forecast spending outstrips forecast revenues in every year to 2029 for a cumulative deficit of $11.0 billion, as Figure 3 shows.
Figure 2: State government revenues, forecasts and actual, billions
Figure 3: Forecast state government revenues and spending, billions
These are the “structural budget challenges” MMB talks about. The source of Minnesota’s budget woes is, quite simply, a level of government spending persistently above revenues as a result of an explosion of spending in 2023 and 2024.
DFL denial
As I predicted, the DFL completely ignored this in their responses to the forecast. House DFL Caucus Leader Zack Stephenson, House DFL Floor Leader Jamie Long, and House Ways and Means Committee Co-Chair Cedrick Frazier all spoke at some length about President Trump. So, too, did Governor Walz in a bizarre performance in front of the TV cameras.
But this doesn’t work as an explanation. As I noted yesterday, “in November 2024, real GDP was forecast to grow by 10.0% from 2024 to 2029 and in November 2025 that forecast is for 9.8% growth…” The alleged economic chaos wrought by the Trump administration which the DFL claims is the source of Minnesota’s budgetary woes isn’t in MMB’s own forecast. Indeed, real GDP growth is now forecast to be higher in 2026 and 2027 than it was in February 2023, as Table 1 shows.
Table 1: MMB’s real GDP growth forecasts
None of them said a word about the fact that state government spending rose sharply in 2023 and 2024, that revenues are not forecast to be high enough to cover it, and that we are going to be running a deficit as far as the forecst sees.
The parlous state of its finances remains the biggest challenge facing Minnesota’s state government. The DFL needs to get real about fixing it and that means acknowledging how it came about. It is never easy to admit when one has messed up, but it is a necessary first step on the road to any recovery.
