Minnesota's looming budget deficit now is a surplus but uncertainty remains

Allison Kite and Nathaniel Minor, The Minnesota Star Tribune on Feb 27, 2026

By clicking submit, I authorize Arcamax and its affiliates to: (1) use, sell, and share my information for marketing purposes, including cross-context behavioral advertising, as described in our Privacy Policy , (2) add to information that I provide with other information like interests inferred from web page views, or data lawfully obtained from data brokers, such as past purchase or location data, or publicly available data, (3) contact me or enable others to contact me by email or other means with offers for different types of goods and services, and (4) retain my information while I am engaging with marketing messages that I receive and for a reasonable amount of time thereafter. I understand I can opt out at any time through an email that I receive, or by clicking here

MINNEAPOLIS — Minnesota’s looming budget shortfall has turned into a small projected surplus, but state budget officials say shifting federal policies and incomplete data means they’re not confident in those estimates.

Minnesota Management and Budget announced in a news release Friday, Feb. 27, that the state’s “budget outlook has improved amid significant near-term economic and fiscal uncertainty.”

In the current 2026-2027 budget cycle, the state has a surplus of $3.7 billion. It also now projects a small, $377 million surplus in the next 2028-2029 budget, according to the fiscal agency.

When Minnesota budget officials last released a budget and economic forecast in December, the state projected a $2.5 billion surplus for the next two years with a looming $3 billion deficit after that.

But the state acknowledged the state’s fiscal health is difficult to assess.

“Shifting policies at the federal level and missing or incomplete data due to recent federal government shutdowns introduce significant uncertainty to the projections,” the agency said.

The updated budget forecast gives state lawmakers breathing room as the Minnesota Legislature’s session gets underway. Last year, lawmakers struggled through negotiations to adopt a bipartisan two-year budget to address what was then projected to be a more than $6 billion deficit the future.

Since then, the federal government has slashed funding for states, a fraud crisis has engulfed Minnesota’s Medicaid program and an unprecedented immigration crackdown forced residents inside and shuttered businesses. It’s unclear how these things will affect the state’s fiscal health.

President Donald Trump’s administration has also targeted Minnesota, threatening to withhold funding for the state because of the fraud problem. On Feb. 25, the federal government demanded the state pay back $259 million in Medicaid funds it received in late 2025. That’s on top of the Centers for Medicare and Medicaid’s previous threat to withhold up to $2 billion per year.

Gov. Tim Walz called that demand a “ransom note” and said it failed to recognize the steps the state has taken to address fraud in its social services programs.

Walz and fellow elected leaders were expected to speak on the state’s new budget numbers in the afternoon.

------------