Minnesota’s latest state budget forecast shows a modest increase from November’s forecast, but still signaled a possible deficit.

The forecast released Thursday morning shows a current surplus of $3.715 billion, up from the previous forecast of $2.4 billion, an increase of roughly $1.3 billion, according to Minnesota Management and Budget (MMB).

The MMB announced in early December that they estimated the state’s projected surplus at $2.4 billion, which was up by around $800 million from May. However, the office projected at that time that nearly all of its surplus would be wiped out by increased spending in the coming biennium if lawmakers don’t make any changes.

On Thursday, the state’s report still says spending is projected to exceed revenue through the 2027 fiscal year, despite making improvements to the structural budgetary balance.

According to Thursday’s report, growth is expected to continue through 2027, partly due to higher collections this fiscal year that have raised the biennium forecast for all major tax types.

The state says corporate tax revenue is showing the most change, and spending estimates remain mostly unchanged from November.

Republicans have said the DFL, which controls both chambers of the Legislature as well as the governor’s office, is “leading the state off a fiscal cliff” while DFL leaders have said legislation they’ve passed is growing the economy and providing more opportunities for Minnesotans.

“Today’s forecast shows Minnesota’s budget is still on the verge of a deficit thanks to Democrats’ irresponsible and unaffordable spending spree last year. Republicans have been warning since last session that this rampant spending will only hurt Minnesotans, and this forecast proves that” said House Minority Leader Lisa Demuth (R-Cold Spring) on Thursday. “Last session, Democrats spent the entire $17.5 billions surplus and raised another $10 billion in taxes on Minnesotans to fuel a massive 40% growth in government. Minnesotans deserve better. We should be looking for ways to scale back wasteful spending, exercise restraint this year, and budget responsibly instead of continuing the reckless spending spree from last session.”

Demuth’s counterpart in the Senate also issued a statement in response to the new forecast:

“There’s no leaping over it, Democrats’ tax-and-spend polices lead to a boom-and-bust budget. Democrats continue to entertain more spending this session while state officials urge caution, especially as the looming deficit signals risk to the state’s credit rating. Meanwhile, Minnesotans are struggling under $10 billion in new taxes while they hand over more tax money on their rebate checks. Senate Republicans will work to repair the damage Democrats have done to the state’s budget and the pocketbooks of millions of Minnesotans. We’ll hold the line on new spending and support a modest, commonsense bonding bill that doesn’t max out the taxpayer’s credit card.”

Mark Johnson (R-East Grand Forks), Minnesota Senate Minority Leader

The surplus stood at a state record of $17.5 billion in February of 2023 when the legislature was in session, but much of that was used by laws passed during last year’s session, one in which the DFL controlled the Minnesota House, Senate and governor’s office for the second time in 31 years — and the first since 2013-14. Among some of the major bills approved by state lawmakers and signed into law this year were an increase in education spending, universal free school meals, funding to combat homelessness, food insecurity and make child care more accessible, and legislation to create a paid family and medical leave program, which has already seen its projected costs rise.

Democratic leaders in the state’s House also sounded off Thursday on the latest forecast:

“This is a good news day for Minnesota, and a proof point for the decisions DFL majorities and the governor made in the 2023 session. This forecast shows that we are a great state to open a business and to raise a family. Our budget ended years of gridlock and put the unmet needs of Minnesotans first, by investing in education, nutrition, child care, health care, affordable housing, economic development, broadband, and much more. We are already seeing the results of those decisions and can move with confidence into discussions about the long-term health of our state economy and budget.

This year, our biggest assignment is to pass a strong capital investment bill that reaches communities, neighborhoods, and families. But we will also pursue policy ideas on issues like consumer protection, medical debt, health care, and emergency medical services to help grow Minnesotans’ household budgets. I look forward to the opportunity to work with our Senate committee chairs, Governor Walz, Speaker Hortman, and Minnesotans to move forward and complete our work this session.”

Senate Majority Leader Erin Murphy (DFL-St. Paul)

“Today’s budget forecast shows that Democratic leadership has Minnesota on the right path. Our economy continues to outpace expectations and our financial future is stable – there are projected surpluses in the current and next forecast period. The budget Democrats enacted during the historically productive 2023 Legislative Session has laid the groundwork for long-term prosperity, a growing middle class, and a future where every Minnesotans has the opportunity to succeed and build a better life. While our economy remains strong and corporate profits are still soaring, we know there are Minnesotans who aren’t doing as well, struggling with an economy that feels tilted against them. We will continue to prioritize cutting costs for Minnesotans in child care, housing, and health care, and we will continue to support workers because that’s the best way to build and economy that works better for everyone.”

House Speaker Melissa Hortman (DFL-Brooklyn Park)

“The new economic forecast shows the investments and policy solutions Democrats are delivering are making a positive difference for Minnesotans. We’re boosting opportunities for Minnesota’s middle class to grow and thrive while our state budget outlook is only improving. House DFLers will continue listening to our neighbors about the challenges they face, and this session, we’re committed to continuing our work strengthening the well-being of working families, our communities, and our entire state.”

House Majority Leader Jamie Long (DFL-Minneapolis)

CLICK HERE for the February 2024 budget and economic forecast. State leaders are being shown THIS PRESENTATION on Thursday, and members of both parties discussed the new forecast after MMB’s presentation on Thursday. You can watch their full news conference in the video player above.

Check back for updates.