On December 4^th, the State of Minnesota’s budget agency, Minnesota Management and Budget (MMB), released its November 2024 Budget and Economic Forecast. The Budget and Economic Forecast (Forecast) provides lawmakers with a projection of the State’s fiscal and economic status for the current and future biennia, and it is used as a starting point for crafting the next biennial state budget. A high-level overview of the Forecast can be found here: November 2024 Economic Forecast.

Although the Forecast projects a structural imbalance (state spending exceeds state revenues) of $2.2 billion beginning in the Fiscal Year (FY) 2026-2027 biennium, lawmakers are projected to have a roughly $616 million budgetary balance in FY 2026-2027 due primarily to a projected budgetary surplus of $3.8 billion from the current biennium (FY 2024-2025). However, the projected $616 million budgetary balance in FY 2026-2027 is roughly $1.1 billion lower than prior estimates from the end of the 2024 Legislative Session.

This Forecast also provides the first glimpse of the fiscal health of the FY 2028-2029 biennium. The structural imbalance in the FY 2026-2027 biennium is projected to widen, with spending continuing to outpace revenue, resulting in a potential $5.8 billion budget deficit in FY 2028-2029. The Forecast noted that a variety of unknown factors at the state and federal levels of government could further contribute to the projected deficit.

While this Forecast provides a preview of the parameters that will influence the Governor’s budget recommendations and the Legislature’s budget setting process, lawmakers will receive another forecast in February 2025, which will be used to further shape and inform budget negotiations.