Proposed Budget - Fiscal Years 2026 - 2027
Minnesota Governor Tim Walz released his two-year budget proposal for fiscal 2026 and fiscal 2027 on January 16. The budget calls for $62.02 billion in total expenditures in fiscal 2026, a 5.9 percent decrease from the recommended level for fiscal 2025, and $61.28 billion in fiscal 2027, a 1.2 percent decrease from the recommended level for fiscal 2026. The budget recommends general fund spending of $32.51 billion in fiscal 2026, an 8.1 percent decrease from fiscal 2025, and $33.39 billion in fiscal 2027, a 2.7 percent increase from fiscal 2026. General fund revenues are projected at $31.59 billion in fiscal 2026 (a 2.3 percent increase from fiscal 2025’s estimated level) and $32.27 billion in fiscal 2027 (a 2.2 percent increase from fiscal 2026). The proposal assumes a budget reserve of $3.18 billion and a budgetary balance of $2.12 billion.
Proposed Budget Highlights
The governor’s two-year budget proposal is focused on fiscal responsibility. The governor noted the plan sets Minnesota up for future success by addressing long-term budget challenges and protecting prior investments to improve lives, including universal meals, paid family and medical leave, and tax cuts for seniors and middle-class families. Highlights of the budget include:
Responsible Cuts and Curbing Growth
- Includes responsible budget cuts and curbs unsustainable growth in spending in the programs that drive the structural deficit
- Limits year-over-year growth rates in Medicaid waivers without limiting eligibility for services
- Cuts state funding to private schools and includes a 5 percent reduction in Special Education transportation reimbursement costs, saving funds while incentivizing schools to create efficiencies in transportation
Lowering Taxes and Closing Loopholes
- Proposes cutting the statewide sales tax by .075 percent, which would be the first sales tax cut in state history
- Recommends closing loopholes by expanding the sales tax base to services provided to individuals by investors, bankers, and lawyers
- Calls for an investment in a new corporate franchise tax division unit to audit complex pass-through entities and close loopholes
- Proposes an increase in the surcharge currently levied on health maintenance organizations from 0.6 percent to 1.25 percent of total premium revenue
Stopping Fraud
- Works towards tighter control and greater oversight by strengthening enforcement authority and creating tougher penalties
- Includes adding nine staff members to the Attorney General’s Medicaid Fraud unit
- Increases the criminal penalty for stealing public funds by 20 percent
Targeted Investments
- Makes targeted investments to support Minnesota’s economic growth
- Expands the Research and Development tax credit
- Increases the Sustainable Aviation Fuel tax credit
- Contains permitting efficiency measures to shorten the time it takes businesses to obtain the permits they need to safely operate in Minnesota