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The state of Minnesota’s expected budget surplus is less than was earlier anticipated, and far short of the historic windfall state lawmakers worked with only two years ago.
And looking into the future, a budget deficit could be on the horizon.
Forecasts released Wednesday showed that the expected surplus for the budget period that ends in mid-2027 is roughly $600 million on a two-year budget of about $72 billion.
That’s $1.1 billion below what was projected in a prior forecast, and storm clouds are building over the ensuing two-year budget cycle with an anticipated deficit of more than $5 billion given present spending and inflation.
Reaction in St. Paul and closer to home was varied, and in part split on party lines.
State Sen. Grant Hauschild (D) said “it’s not an emergency, it’s not a rainy day,” and called the present surplus “by historical standards a pretty good number.”
State budget officials, in a presentation this week, said reductions in sales and income tax projections as well as higher spending for long-term care and special education were straining the budget.
But State Rep. Roger Skraba (R) of Ely had a more cautious take, suggesting the DFL “trifecta” spent too much.
“They can say we did great things but if I had unlimited funds I could do good things too, but we didn’t have unlimited funds.”
Skraba added that “during the campaign all I heard was ‘what are you going to do to lower my property taxes?’ It didn’t matter if it was in International Falls, or Ely or up on the North Shore. I heard it everywhere.”
Gov. Tim Walz said the state’s budget picture remained strong and Hauschild agreed, noting a budget reserve of $3.5 billion - the largest in Minnesota history.
House Republican leader Lisa DeMuth said budget cuts, however, would be needed.
Hauschild and Skraba also found some common ground, with the Hermantown Democrat saying “ I don’t anticipate the budget will grow - I think we’ll see some slimming down.”
Skraba said that Republicans and Democrats are far apart on the size of the next state budget, which would shrink to $67 million, because many of the items approved in the current budget were “one-time” spending items.
“Those were one and done and they’re not going to happen again,” said Skraba.
Yet Skraba said he remains hopeful there will be a bonding bill approved in 2025, although he voiced hope the state would curb “unfunded mandates” that he says put an undue burden on units of government including counties, schools and cities.
“Say you build a new building and you have to put a $7,000 air conditioner in, but there are thousands of buildings with old ones, why do you have to have the $7,000 air conditioner?” said Skraba. “And it won’t be a free-for-all all anymore. We’ll all need to tighten our belts.”
Hauschild said he is thankful that the state projects out years in advance and “it makes sure we are being thoughtful about long-term trends, and what that shows are those costs are going up,” particularly for special education and disability and long-term care.
“It’s due to an aging population, and we seem to continue to have growing special needs among our young kids,” said Hauschild.
Hauschild also noted that the possible deficit is years down the road, for the budget cycle that runs from July 1, 2027 to mid-2029, and that the projection “gives us a lot of time, and to look at our budget for 2025 and 2026 even.”
“We’ve got some tough choices to make,” he said.
Hauschild said that the split in the Minnesota House, where Democrats and Republicans are tied, could be helpful in bringing the branches of government together.
Skraba was more blunt. “We can’t overspend,” he said.
