A Deficit Created by Runaway Spending, Unchecked Fraud, and Tax Hikes
by Senator Jason Rarick
Minnesota Management and Budget (MMB) recently shared the updated state budget forecast, and unfortunately, it confirms what we’ve been warning about for years – Minnesota is heading towards a large deficit totaling $5.4 billion. We first heard of this deficit a few years ago, and now, as spending continues to outpace revenue, that projected deficit continues to grow. There are a few very clear contributing factors: slow economic growth, increased spending on health care due to fraud, and a mismanagement of funds. Every Minnesotan should be concerned by this clear warning sign.
According to MMB, the state will see a small, short-term surplus totaling $2.465 billion for 2026-2027, followed by the $5.4 billion deficit in 2028-2029. This is due in large part to the $10 billion in tax hikes that were passed in previous legislative sessions, which were enough to sustain a small surplus for the next biennium, but not nearly enough to ensure our state’s long-term financial stability.
Slow economic growth is another major factor in revenue losses. The Minnesota Chamber of Commerce recently released its Business Benchmarks Report, which ranked Minnesota 38th with 1% GDP per capita annual growth, 40th for labor force growth, and 41st 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. It painted a very bleak picture.
Increased spending on health care also pressures revenues, which is notable because Minnesota has seen significant fraud in health care service programs. Efforts to reduce fraud and verify eligibility will be necessary to ensure these funds are available for those who actually need them. As it stands, this fraud is going to have a long-term impact on our state and its economy unless we can get things in order.
A deficit like this is also exactly what happens when money is spent in a way that does not generate positive growth for our state’s economy. We had a near-$19 billion surplus and had a perfect opportunity to jumpstart our economy with wise investments, but instead, the entirety of those funds was spent irresponsibly, with much of the surplus going to unproven non-profits, propping up new government agencies, and funding frivolous bills and grants. When you don’t invest in building your economy, it leads to deficits. Those deficits then lead to increased taxes, which many Minnesotans have already been seeing in the forms of higher sales taxes, higher property taxes, and an increase in tax levies on ballots across the state.
I also want to remind folks that when the deficit originally came to light, the Walz Administration’s “solution” was to shift costs onto counties. If the government “cuts” spending by shifting costs, that still increases your taxes. Many people understand taxes are necessary and are fine with paying them if they know their money is being used wisely, but due to continued mismanagement and a constant stream of fraud, many taxpayers don’t feel that way right now.
It's incredibly clear: this new forecast revealed a sustained deficit due to runaway spending, unchecked fraud, and slow economic growth hampered by billions in new taxes on Minnesotans. This is a tough spot for our state’s budget to be in, but it requires a very simple solution: stop the fraud, rein in spending, and put Minnesotans first instead of big government. I intend on making these issues my top priority in the next legislative session.