Legislative update: State lawmakers receive updated budget forecast
By Amanda Bilek
MCGA Senior Public Policy Director
Last Thursday, Minnesota Management and Budget (MMB) released the February forecast. State legislators will use the latest economic and forecast numbers to write a budget for fiscal years 2026 and 2027. The February forecast is an update from the November projection. The February numbers are mostly consistent with the November projection but did worsen slightly. In November, a small surplus of $616 million was estimated to be available for the FY 26/27 biennium but that projected surplus decreased to $456 million in the February estimate. Looking ahead to the FY 28/29 biennium, a $5.76 billion deficit was projected in November. That projected deficit grew to nearly $6 billion in the February numbers. Included in the forecast is the acknowledgment of near-term economic and fiscal uncertainty due to proposed federal budget changes or uncertain economic impacts from proposed tariffs on a variety of imports. Depending on what proposed changes are enacted at the federal level there could be an impact on future state budgets. Setting aside the uncertainty at the federal level, what is more likely to drive near-term budget decisions at the state level is current state spending that is exceeding revenue collections or recently enacted programs that are spending more than budgeted. You can look at the complete details for the February forecast here.
What does this mean for MCGA state policy priorities? Any priority that requires money will face a higher level of scrutiny this year. That scrutiny will intensify for the next budget cycle and we will likely need to match the ambition of an ask to available resources. However, it is important to emphasize that the agriculture budget for the state of Minnesota is only one-half of one percent, so very small compared to other areas. Despite a small budget, agriculture is still one of the top economic drivers for Minnesota. We cannot balance the state budget on the back of agriculture. It is also important to note that agriculture funding did not receive the percentage level of increase compared to other budget areas when the budget for fiscal years 2024 and 2025 budget was put together in 2023. In other words, cuts to other budget areas that received significant increases should be scrutinized first.
You can expect that the balance of the legislative session will be focused on the budget. The MCGA policy team has been busy the last couple of weeks advancing our policy priorities during bill hearings and testimony. You can read a recap here.
Another big event is happening today that will have an impact on the rest of the Legislative Session. There is a special election for a state house seat in the northern suburbs of the Twin Cities that has been vacant since the beginning of the year. The outcome of that race will determine the final balance in the House of Representatives. House district 41B is a historically DFL leaning district. If the DFL candidate prevails in the race, the House will return to an even 67-67 split. A previously agreed to leadership power sharing agreement will govern the operations of the House, including co-committee Chairs passing the gavel each day between a DFL or GOP chair and evenly split committees between the two caucuses. If the GOP candidate were to prevail in the special election and the GOP caucus were to secure 68 members, the power sharing agreement would no longer be in effect and the GOP would be able to exercise the prerogative of the majority in setting the agenda for the Minnesota House of Representatives.
