(The Center Square) – Minnesota’s budget outlook for the coming fiscal year has significantly improved, despite ongoing economic and fiscal uncertainty.
According to the February budget forecast recently released by Minnesota Management and Budget, the state now projects a $3.7 billion balance for fiscal year 2026-27 – $1.3 billion higher than estimates from November.
The state credits a slightly stronger economic outlook and higher revenue projections, though much of that revenue comes from volatile sources.
Spending growth is expected to outpace revenue through fiscal year 2029, and structural imbalances remain. Federal policy changes and missing or incomplete data from recent government shutdowns add further uncertainty to Minnesota’s financial stability.
Republican leaders in the Minnesota House said this forecast shows the state has an opportunity to provide tax relief and pro-business policies.
House Speaker Lisa Demuth, R-Cold Spring, said the state should pass a bipartisan tax conformity bill that exempts overtime and tips from taxation while supporting businesses.
“Tax increases on Minnesota families and more government spending should be off the table, and our focus should remain on lowering costs on family budgets,” Demuth said.
Democrats, however, argued that the improved numbers largely benefit wealthier Minnesotans and corporations rather than everyday workers.
Rep. Zack Stephenson, DFL-Coon Rapids and Democratic-Farmer-Labor caucus leader, pointed to the forecast’s rapid growth in “non-wage income” – earnings from capital gains, interest, and dividends—as evidence that the gains are not reaching typical households.
“I was glad to see the improvement in the state’s fiscal position,” Stephenson said. “But regular Minnesotans are still feeling the pain. An ABC News poll released this morning shows over half of Americans believe health care, a new car, and a week-long vacation are unaffordable. The House DFL will stand with the people who are struggling, including those losing health care coverage under federal policies.”
House Minority Leader Harry Niska, R-Ramsey, said the forecast presents an opportunity to expand pro-business policies that he called the “real solution” to what he described as a fiscal disaster created by Minnesota Democrats.
“We need to reverse the policies that are holding our state economy back if we’re going to participate in the national economic rebound,” Niska said.
Minnesota’s constitution requires a balanced budget, meaning projected revenues must equal or exceed projected spending, which makes these forecasts essential to the budgeting process. Currently, in the Minnesota State Senate, the DFL Party holds a slim majority by just one seat. DFL has 34 seats, compared to the Republicans’ 33. In the Minnesota State House, DFL and Republicans are tied—both holding exactly 67 seats.
