Minnesota’s financial landscape has dramatically shifted from a $19 billion surplus to a projected $6 billion deficit under Governor Tim Walz’s leadership, leaving taxpayers wondering how such a dramatic reversal occurred.
At a Glance
- Minnesota faces a projected $6 billion budget deficit for the 2028-2029 budget cycle after previously enjoying a $19 billion surplus
- Republicans blame Democrats for an “irresponsible spending spree” that depleted the $17.6 billion surplus
- Democrats attribute the fiscal downturn to rising costs in long-term care, special education, and federal policies
- The state has over $3 billion in budget reserves that could help mitigate potential cuts
- Legislators face a May 19 deadline to pass a new two-year state budget or risk government shutdown
From Prosperity to Crisis: Minnesota’s Budget Reversal
Minnesota’s financial outlook has deteriorated dramatically under Governor Tim Walz’s administration, with projections showing a $6 billion deficit for the 2028-2029 budget cycle. This stark reversal comes after the state previously enjoyed a $19 billion surplus in 2022. While the immediate two-year budget shows a modest projected surplus of $456 million, the long-term fiscal picture has state officials concerned. The record-breaking $71 billion two-year budget passed by DFL lawmakers when they controlled both chambers has now given way to difficult discussions about spending cuts and financial responsibility.
Republican leaders have not minced words about who they believe is responsible for the financial downturn. House Speaker Lisa Demuth, R-Cold Spring, characterized the Democrats’ handling of the previous surplus as an “irresponsible spending spree.” GOP lawmakers argue that the dramatic spending increases implemented when Democrats held full control of state government created unsustainable financial obligations that Minnesota taxpayers will be dealing with for years to come. The current budget projection has Republicans calling for broad spending cuts to address the looming deficit.
Yeah, pretty dire when you use total control of state government to:
❌Blow a $19 Billion surplus
❌Raise taxes $10 Billion
❌Grow spending $20 Billion
❌Create a $6 Billion DeficitThen propose:
❌Cuts to Education
❌Cuts to Medicaid
❌Cuts to Special Ed
❌More Taxes/New Fees https://t.co/Qq0tgO4IgK— 🇺🇸Zach Duckworth🇺🇸 (@ZachDuckworth) March 25, 2025
Competing Explanations for the Fiscal Decline
Democrats and Governor Walz have offered a different explanation for the budget reversal. They point primarily to rising costs in long-term care for people with disabilities and special education as major drivers of the projected deficit. These programs, they argue, face structural funding challenges that have created ongoing financial pressure. The Walz administration has also proposed budget adjustments, including reductions in projected state spending on Medicaid waivers for low-income Minnesotans with disabilities, in an attempt to address part of the shortfall.
“I think that there’s a lot of risk in front of us right now,” state Budget Commissioner Erin Campbell warned about Minnesota’s financial outlook.
In a controversial move, Governor Walz has attempted to shift blame to federal policies. “There is a storm at the federal level, and that storm is Donald Trump,” Walz claimed, suggesting that anticipated federal policy changes will worsen Minnesota’s budget situation. State budget officials project that tariffs, tax cuts, and deportations could lead to higher inflation, affecting both revenue and spending. With federal funds constituting approximately one-third of Minnesota’s budget, potential federal cuts could reduce the state’s funding by $1.2 billion to $1.6 billion in fiscal year 2027.
Financial Mismanagement and Program Failures
Adding to Minnesota’s financial woes are cases of significant fraud and mismanagement in state programs. A $250 million scandal in the Feeding Our Future program represents one of the largest pandemic-related fraud cases in the country. Additionally, the Minnesota Department of Human Services must repay $113 million to the federal government due to a payment error, further straining the state’s finances. These incidents have raised questions about oversight and accountability in the Walz administration.
Despite increased education spending under Walz, reports indicate declining proficiency in reading and math among Minnesota students. This has raised concerns about the effectiveness of the administration’s education policies and whether the substantial financial investments are yielding appropriate results. In response to the fiscal challenges, some lawmakers are now proposing education budget cuts, creating tension with the administration’s previous commitments to education funding.
Looking Ahead: Difficult Choices
Legislators face a critical May 19 deadline to pass a new two-year state budget, which is expected to total around $66 billion. Failure to reach an agreement could trigger a special session and potential government shutdown. While the state currently has over $3 billion in its budget reserve, Senate Majority Leader Erin Murphy has suggested these rainy-day funds might be needed if federal Medicaid funding is cut. The budget negotiations will require difficult choices about spending priorities and potential program reductions.
The dramatic shift in Minnesota’s financial outlook from a substantial surplus to a projected deficit raises fundamental questions about fiscal management and sustainability. For many Minnesota taxpayers, the situation serves as a cautionary tale about government spending and the long-term consequences of financial decisions. As budget negotiations continue, the path forward will likely involve difficult trade-offs and renewed scrutiny of spending priorities under Governor Walz’s administration.
