Back in March, Minnesota Management & Budget (MMB) released its February Budget and Economic Forecast. As we reported at the time:
The forecast budget surplus for the 2026-2027 biennium is down $160 million — from $616 million in November to $456 million — and the forecast deficit for the 2028-2029 biennium is up to $4.0 billion, or $6.0 billion if you account for inflation.
Today, we learned that the forecast budget surplus for the 2026-2027 biennium is up to $2.5 billion but that we still have a forecast 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. 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…”
But economic growth hasn’t actually slowed, at least on MMB’s forecasts. When these deficits for the 2028-2029 biennium first blew up in the November 2024 forecast, real GDP growth was forecast to be 2.0% in 2025 and 1.8% in 2029, as Figure 1 shows.
Figure 1: MMB’s real GDP growth forecast, November 2024
The November 2025 forecast has GDP growth of 2.0% forecast in 2025 and 1.8% in 2029, Figure 2 shows: This is identical to the forecasts made during the Biden administration last November. These forecasts are prepared on the basis of enacted, not potential policy.
Figure 2: MMB’s real GDP growth forecast, November 2025
There are minor differences in between, as Table 1 shows. Next year, real GDP growth is forecast to be 0.1 percentage points higher than it was in November 2024 and 0.3 percentage points lower in 2028. Indeed, 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, as Figure 3 shows. Slower, yes. Barely.
Table 1: MMB’s real GDP growth forecasts, November 2024 and 2025
Figure 3: MMB’s real GDP growth forecasts, November 2024 and 2025
You can read these forecasts any way you like to annoy anyone you like. On the one hand, the Trump administration has not, on these forecasts, tanked the economy. On the other, neither has it unleashed some economic boom. Whatever the truth, changes in the macroeconomic conditions which haven’t actually happened cannot account for large swings in the state budget from surplus to deficit.
