Minnesota’s streak of historic surpluses continues, leaving the first DFL-controlled government in nearly a decade with a projected $17.6 billion to craft the state’s next two-year budget.
State budget officials said Tuesday that strong tax collections and a large leftover surplus from the spring have left a record-high level of resources available to lawmakers through June of 2025.
“That’s an incredible balance, any way you look at it,” Minnesota Management and Budget Commissioner Jim Schowalter said.
The state budgeting agency touted Minnesota’s economic outlook as “stable and resilient” with revenues exceeding spending over the next several years.
The forecast looks at how the economy is affecting state finances and will help shape the budget conversation over the next few months. Flush with resources, Democrats will contend with pent-up demand from allied groups after years of divided government in Minnesota.
Part of the surplus is money left on the table last session, when lawmakers failed to finalize a sweeping package to spend what was left of a historic $9.3 billion budget surplus on tax cuts, classrooms, health care and public safety initiatives.
Gov. Tim Walz has signaled interest in picking up some of the pieces from that plan in his next two-year budget, including more funding for classrooms, social security income tax cuts and spending on new public safety initiatives.
He also wants to pump more resources into childcare affordability and revive his proposal for direct tax rebate “Walz checks” for Minnesotans. The governor will kick off the budget-setting process when he releases his proposal in January.
Legislative Democrats, who kept control of the Minnesota House and narrowly took power in the state Senate in the midterm election, have also signaled a desire to spend some of the surplus on setting up a statewide paid family and medical leave program in Minnesota.
The surplus could grow or shrink by the February economic forecast, which will kick off the Legislature’s budget work.
Republicans, who will be in the minority in both chambers next session, said the massive surplus means Minnesotans are being overtaxed and warned against overreach from Democrats.
“We should spend most of the next session working to give as much of it back to Minnesotans as possible,” House Minority Leader Lisa Demuth, R-Cold Spring, said in a statement. “Tax hikes of any kind should be a complete non-starter.”
With inflation and energy costs still high — plus a possible recession looming on the horizon — Senate leader Mark Johnson, R-East Grand Forks, said Minnesotans need ongoing relief.
“The last time Democrats had single-party control, we saw a plethora of new government programs requiring billions in permanent tax and fee increases,” he said in a release. “We simply can’t afford to see government grow faster than our paychecks.”
The forecast does not account for inflation, a change state lawmakers made two decades ago when facing significant deficits. With inflation rates still high, budgeting groups are pushing to add rising costs to the state’s February numbers.
Other state leaders will react to the surplus news Tuesday afternoon.
This is a developing story. Please check back for updates.