Minnesota officials will get a key briefing on the state’s economy and budget on Thursday, jumpstarting discussions about what lawmakers can accomplish in 2026.
The report comes amid heavy economic uncertainty that could impact the state’s outlook and potentially require intervention from the Legislature.
Economists and leaders from the Department of Minnesota Management and Budget will offer a glimpse into how much money the state is collecting in taxes and fees — and how much it is spending on schools, public safety, health programs and other government services.
The forecast will also provide the state’s fiscal outlook for the next several years. However, results could be murkier than in prior forecasts because some amount of employment and inflation data won’t be available to supplement the report because of the federal government shutdown. That could lead to less clarity about how the national and state economy are faring.
Reports heading into the forecast address suggest that Minnesota could see a mixed bag on the horizon.
A report wrapping up the last budget showed the state came out with about $1 billion more on the bottom line than previously projected. But October revenues came in lower than what were anticipated. That’s the last monthly report prior to this forecast.
Lawmakers and Gov. Tim Walz tried to tamp down expected increases in spending last spring, focusing on programs for people with disabilities. A forecast back in February projected that Minnesota could run a deficit down the road without a change in course.
Budget officials will outline whether the moves changed the trajectory and whether Minnesota is in a better or worse position financially than it was back then.
House Speaker Lisa Demuth, R-Cold Spring, said lawmakers will likely have to take another look at where they can rein in spending in 2026.
“We know we have a deficit going forward. We were able to take a bite out of that this last session, and we did good work with the spending reduction of $5 billion,” Demuth said. “But there's more work to be done. We have to be responsible with taxpayer money.”
Like spending reductions approved this year, any decisions around money going out will have to have bipartisan backing. That’s because DFLers have a one-vote edge in the Senate and are expected to return to a tie in the House after a pair of special elections next month.
Federal policy changes adopted this year could also have big ramifications for the state, as well as local governments in Minnesota. A lot of those focus on social safety net programs and requirements attached to them.
Democratic leaders said they’re worried that the Republican-driven tax and spending bill that passed over the summer, along with higher prices for health insurance, could worsen the economic outlook.
“Those things, despite the strong economy, the pretty strong economy in Minnesota, those things could impact the forecast in a negative way,” Senate Majority Leader Erin Murphy, DFL St. Paul, said. “So I don't know what we're going to see. I hope that the balance that we put into place carries us through.”
House DFL Leader Zack Stephenson, of Coon Rapids, said he wouldn’t be surprised to see a grim economic outlook.
“There are storm clouds on the horizon, and I think anyone who's just living in this economy has real concerns about where we're headed,” he said.
Democrats have highlighted the impact of federal policies on Minnesota. Meanwhile, Republicans are drilling down on the actions of Gov. Tim Walz’s administration and budgeting decisions under the 2023 DFL trifecta.
They’ll likely repeat those comments following the presentation Thursday and give a taste of what’s to come during the 2026 legislative session — and on the campaign trail as all 201 legislative seats and top state offices appear on the ballot.