Walz’s budget plan ignores Minnesota’s long-term fiscal challenge
Owing to the growing budget deficit, Gov. Tim Walz has called for more spending cuts in addition to what he initially proposed in January. Overall, Minnesota Management and Budget (MMB) estimates that Walz’s new budget plan will save $900 million in the 2026-27 biennium and $2 billion in the 2028-29 biennium when compared to the February 2025 forecast.
But are these spending cuts enough to address the deficit? A closer look at the gap between revenues and spending under Walz’s plan leaves a cause for concern.
Structural deficit remains
The good news: Walz’s budget eliminates the state’s $6 billion deficit in the 2028-29 biennium, leaving a $ 300 million surplus.
Unfortunately, however, spending still exceeds collected revenues in the entire period between 2026 and 2029. Budget shortfalls could likely persist beyond the 2029 fiscal year.
Figure: Current Revenues vs. General Fund spending, Walz Budget Proposal (Billion $)
In the 2028-29 biennium, Walz proposes spending over $71 billion (after accounting for inflation). Revenues collected in that biennium are nearly $3 billion less than total spending. Similarly, there is a structural imbalance of $1.4 billion in the 2026-27 biennium.
Other issues: tax hikes and cost-shifting
Not to mention, Gov. Walz has proposed shifting some costs onto counties and raising taxes on Minnesotans.
To deal with rising spending on disability waivers in Medical Assistance (MA), Walz has proposed creating a 5 percent county share. This would not address rising costs but rather shift them onto counties.
And while Walz wants to lower the sales tax rate, this is accompanied by a broadening of the sales tax base, increasing tax revenues by over $400 million. Walz also suggested raising the HMO surcharge — a tax levied on some types of health care insurance companies.
A good starting point
Walz’s plan offers a good starting point in addressing rising spending. However, the plan falls short of ensuring long-term budget sustainability.