Minnesota’s Budget Surplus Climbs to $3.7 Billion in February Forecast, Long Term Deficit Remains

(KNSI) – Minnesota’s budget outlook has improved as the Legislative session enters its second week, with the February budget forecast showing a projected general fund balance of $3.7 billion for the fiscal year 2026–27 biennium, $1.3 billion higher than November’s estimate.

Friday’s numbers from the Minnesota Management and Budget credit a slightly improved economic outlook for the gains, with revenue growth driven largely by more volatile sources. However, officials note that spending growth continues to outpace revenue growth through FY 2029, and the projected general fund balance for the FY 2028–29 biennium stands at just $377 million, a sign that a significant imbalance remains.

The forecast also carries notable uncertainty. Shifting federal policies and missing or incomplete data stemming from recent federal government shutdowns complicate the long-range projections.

Republican leaders at the Capitol wasted little time responding to the improved numbers, framing the surplus as an opportunity for tax cuts rather than new spending.

House Speaker Lisa Demuth (R-Cold Spring) said the forecast creates an opening for bipartisan action. “Today’s forecast gives us the chance to pass a bipartisan tax conformity bill that helps workers through common-sense policies, like no tax on tips and no tax on overtime, and helps our Main Street businesses continue to be the job creators that keep our state strong,” Demuth said.

“Tax increases on Minnesota families and more government spending should be off the table.” House Minority Leader Harry Niska (R-Ramsey) struck a sharper tone, attributing the improved outlook to pro-growth economic policy and calling for a broader reversal of recent state spending decisions. “This forecast demonstrates that pro-business economic policies and economic growth are the real solution to the fiscal disaster created by Minnesota Democrats,” Niska said.

Rep. Isaac Schultz (R-Elmdale Township) called the forecast confirmation of what he called Minnesotans’ demand for tax relief, citing what he described as a heavy cumulative tax burden on working families. Schultz also referenced past state fraud issues and called for a one-time tax rebate to return the surplus to taxpayers.

The Minnesota Chamber of Commerce welcomed the improved near-term picture but flagged the longer-term structural imbalance as a concern.
“Today’s forecast is a reminder that when our economy grows, the state’s budget outlook improves and creates more opportunities for all Minnesotans,” said Doug Loon, President and CEO of the Minnesota Chamber. “It’s concerning that spending growth continues to outpace revenue growth. Enacting policies that grow our economy can help eliminate this gap and reduce pressure on taxpayers.”

Legislative leaders are expected to debate how to allocate the surplus in the weeks ahead, with Republicans pushing for tax cuts and rebates and the structural gap likely to shape discussions around long-term spending commitments.

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