The state budget forecast presented today revealed a sustained deficit due to runaway spending, unchecked fraud, and slow economic growth hampered by billions in new taxes on Minnesotans.

“The small short-term surplus is driven by a massive $10 billion in tax hikes on every Minnesotan,” Senator Eric Pratt (Prior Lake) said. “The billions in tax hikes aren’t enough to keep up with Democrat spending demands and out of control fraud throughout state government. We need to stop the fraud, rein in spending, and put Minnesotans first instead of big government.” Pratt serves as Republican Lead on the Senate Finance Committee.

The overall forecast reveals the state’s spending is outpacing revenue, despite of $10 billion in new taxes. According to Minnesota Management and Budget, the budget for fiscal year 2026-2027 includes a $2.465 billion surplus, even while spending outpaces revenues. However, looking to 2028-2029, the deficit balloons to $5.4 billion as spending is projected to outpace revenues. Only by not spending the surplus would the 2029 deficit projection reduce to $2.960 billion.

Slow economic growth is a major factor in revenue losses. This underscores concerns raised from a Minnesota Chamber of Commerce Business Benchmarks Report released two weeks ago, ranking Minnesota 38^th with 1% GDP per capita annual growth, 40^th for labor force growth, and 41^st in net domestic migration. Between 2019 and 2024, key economic statistics slowed to nearly stagnant or negative levels, reversing previous trends, and impacting the state’s overall economic climate.

Additionally, increased spending on health care pressures revenues. This is notable as Minnesota has seen significant fraud in health care services. Efforts to reduce fraud and verify eligibility will be necessary to ensure these funds are available for those who actually need it.