OMB Forecasts $616M Budget Balance for 2026-27, Down $1.1B from Prior Estimates

(KNSI) — The Office of Management and Budget released the budget forecast Wednesday, showing a balance of $616 million at the end of the 2026/2027 biennium, which is $1.1 billion less than previous estimates.

Projected reductions in income and sales tax revenues combined with higher spending for long-term care and special education have resulted in a “growing structural imbalance throughout the budget planning horizon.” The imbalance could be as much as $5 billion by the end of the decade.

Critics blame the shortfall on the DFL-led legislature spending the state’s $18 billion budget surplus during the last session and a nearly 40% increase in spending.

House Speaker-Designate Representative Lisa Demuth (R-Cold Spring) issued a statement on the forecast, saying, “While the budget is stable in this biennium, it’s obvious that spending reductions are needed to prevent a deficit down the road.” She also warned state agencies that “the times of automatic budget increases and dramatic government employee growth are over.” She says House Republicans expect the agencies to work with lawmakers to “find savings and root out waste and fraud.”

Demuth has not been shy in expressing her frustration and outrage after $1 billion in fraud has been uncovered in the last few years, starting with the $250 million Feeding Our Future scam. This past summer, the Minnesota Department of Human Services opened an investigation into potential Medicaid fraud at more than a dozen autism centers, and the U.S. Department of Labor said more than $434 million was overpaid by the state in pandemic unemployment benefits. A report by the Legislative Auditor also showed significant problems with the Frontline Worker Pay Program, which gave bonus checks to those who worked on the frontlines during the COVID-19 peacetime emergency. Forty-one percent of applicants couldn’t be verified, and ineligible applicants received payments anyway.

The next session gavels in at 12:00 noon on Tuesday, January 14th, 2025.

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