Minnesota leaders: state forecast shows surplus, warn federal cuts could erode reserves

Erin Murphy, Senate majority leader, and Melissa Hortman, speaker of the Minnesota House, said Monday that the state’s February budget forecast shows a current biennium surplus and the largest budget reserve in state history, but they warned that proposed federal spending cuts and worsening national economic indicators could shrink those gains and force difficult choices.

"This forecast tells us that in this present moment we have a stably balanced budget, we have a surplus, we have a stable economy and we have the strongest budget reserve in the state's history," said Erin Murphy. She blamed recent federal policy and market turbulence for eroding the state’s outlook, saying, "Trump and Elon Musk are bragging about their chaos. They're causing it." Murphy also used a profanity to describe Republican congressional leaders, saying they needed to "pull their heads out of their asses and get to work for the people of this country."

The forecast figures discussed by Murphy and Hortman include roughly $3.7 billion in cash on hand for the coming biennium, about $1.1 billion identified to cover inflationary increases in programs, and roughly $616 million remaining after that set-aside. Murphy said Democrats are leaving about $3.5 billion in reserve in addition to the cash on hand and described a total surplus figure of about $17.5 billion cited in briefing materials.

Hortman said the forecast is a practical tool for writing a balanced budget for the biennium and said Democrats will propose targets and work with Republicans on compromises. "We will enact a balanced budget by the time the legislative session is over," Hortman said, adding that if federal actions force additional cuts, the Legislature could reconvene in the fall.

Both leaders described potential federal risks. Murphy cited a recent House budget resolution and other federal proposals that she said would cut trillions from programs Minnesotans rely on, including Medicaid, Social Security and Medicare. Hortman said the state’s outlook depends in part on federal funding, noting that about $45 billion of projected state revenue in the forecast comes from federal sources and that those funds are at risk if federal policy changes.

On areas under review to balance the state budget, Murphy and Hortman said they are scrutinizing agency budgets and programs with high growth rates. Hortman noted proposals from the governor to slow the growth of certain program costs — not as direct cuts but as efforts to reduce the rate of increase — citing disability waiver services and special education as examples where growth rates exceed inflation. They also said the forecast now includes inflation adjustments to the general education funding formula so school funding will rise automatically with inflation in the projection.

Reporters asked for timing and specifics. Hortman said House DFL will release budget targets by April 1, and Murphy said the Senate will announce targets by April 5. Both leaders said they hoped to finish budget work by May 19 but acknowledged that federal developments could force special sessions later in the year.

No formal budget actions, votes or bills were taken during the remarks; the session recorded here consisted of a presentation of the forecast and a question-and-answer exchange with reporters.

Looking ahead, Murphy and Hortman said Democrats will press to protect working Minnesotans and to preserve the state’s fiscal position, while also preparing contingency plans if federal policy reduces funding available to Minnesota.