Minnesota Office of Management and Budget Reduces Expected Deficit for 2028-29 Biennium

(KNSI) – The Minnesota Office of Management and Budget is forecasting well-below normal economic growth for the state all the way through 2027.

The preliminary figures released on Thursday now expect 2025 GDP of 2%, well below the 2.3% predicted by the agency in February. The compound growth rate for 2026 and 2027 was bumped up from 1.8% to 1.9%, but that is still a much slower economic expansion than is typical for the state.

Despite the GDP sluggishness, Minnesota’s fiscal house remains in order, at least in the short term. The current forecast is for a better than $2.4 billion surplus at the end of this biennium, roughly $579 million more than February’s figure. Rainy day reserves are running high at nearly $3.8 billion to cover unexpected expenses.

A structural imbalance remains for the next biennium, though. Fiscal years 2028 and 2029 are in the red to the tune of $2.96 billion, but even that number is an improvement from February’s guess, thanks to bipartisan negotiations last legislative session that reined in spending.

Governor Tim Walz reacted to the new forecast, saying the Trump Administration’s economic policies are making the job more difficult. “Today’s snapshot does show uncertainty. I don’t think that’s any surprise to Minnesotans who have seen impacts on their own family budgets: It’s no surprise to anyone who has looked at their health care premiums for next year. It’s no surprise to anyone who has gone out to buy anything from a new car to a cup of coffee and seen a new tariff reflected on their bill.

“But in Minnesota, we know how to balance a budget. It’s what we’ve done for the last seven years, and it’s what we’ll continue to do. We’re standing on a solid foundation, and we have the tools to continue managing a budget that makes Minnesota a great place to live.”

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