Minnesota forecast shows small FY2026-27 surplus but larger planning-year shortfall amid federal uncertainty

Commissioner Erin Campbell of Minnesota Management and Budget told the Senate Finance Committee on Feb. 10 that the February 2025 budget and economic forecast shows a $456 million projected balance for the FY 2026‑27 biennium, down about $160 million from the November estimate.

The presentation emphasized that while revenues are modestly higher in some categories, spending growth—largely in education and health and human services—has increased the projected planning‑year shortfall. "We now forecast a positive balance of $456,000,000 for FY 26‑27," Commissioner Campbell said, adding that the planning years now show a projected deficit just under $6 billion for FY 2028‑29.

The nut graf: The forecast offers the four‑year outlook lawmakers use to write the biennial budget and highlights two central pressures: higher inflation that raises both revenues and costs, and uncertainty about federal policy, especially possible reductions in Medicaid funding that could materially worsen the state's position.

State economist Dr. Anthony Becker said national factors pushed the outlook in February. He described higher forecasts for 2025 inflation and a tighter interest‑rate path from the Federal Reserve, saying the consultant SPGMI supplied assumptions that include tariffs and slower net international migration.…