“We’re doing the best that we can given the circumstances. ... We have to balance this budget,” Murphy said in an interview. “That’s our job. And there is a lot of chaos and uncertainty coming from Washington, D.C., so we know we could do this job and then later this summer or fall be facing deep cuts in Medicaid, deep cuts to our public schools, deep cuts to SNAP.”
“We will have to confront that if it happens,” Murphy added. “I hope it doesn’t.”
Minnesota was already facing a projected budget shortfall before President Donald Trump took office, with the state outlook driven mostly by rising long-term care and special education costs, as well as overall spending growth. The state’s economic outlook worsened in recent months amid economic uncertainty from tariffs and other changes at the federal level.
Governor Tim Walz, left, listens to Budget Commissioner Erin Campbell as she unveils the state’s latest economic forecast on March 6. (Elizabeth Flores/The Minnesota Star Tribune)
In early March, state budget officials released an economic forecast showing Minnesota’s projected surplus for the next two yearshad shrunk to $456 million, while an anticipated deficit in the 2028-2029 biennium increased from $5.1 billion to $6 billion.
That economic forecast assumed the state would spend about $3.6 billion on discretionary inflation increases over the next four years. Discretionary inflation spending is for state programs that do not have inflationary increases built into their funding formulas. These programs make up nearly 40% of the state’s budget.
If the state takes discretionary increases for those programs off the table for the next four years, the projected 2028-2029 budget shortfall shrinks to about $2.4 billion. Senate Democrats are taking that approach, cutting discretionary inflation spending to help balance the budget.