Gov. Tim Walz is expected to share his plans for the 2025 state budget on Thursday afternoon – and based on the latest budget forecast, lawmakers can either do more with less, raise taxes, or some sort of combination.

Passing the budget is already an uphill battle due to having a divided House and Senate.

Lawmakers are dealing with a lot less money than once expected, so they’ll have to get creative. In December, the state budget forecasted a short-term surplus of $616 million through 2026-2027, which is $1.1 billion less than previously estimated.

Meanwhile, the state budget office predicts that would mean revenue cuts and higher spending on things such as long-term care and special education.

In addition, the office is now projecting a deficit of $5.1 billion for 2028-2029. However, the 2024-25 biennium is now expected to finish with a surplus of $3.75 billion, which is $461 million higher than projected.

Walz said with a divided Capitol, there needs to be a willingness to find solutions that improve lives.

RELATED: Minnesota Senate leaders ready for budget battle I House power struggle goes to Minnesota Supreme Court I Democrats petition Supreme Court to declare GOP lacked quorum to elect speaker

Another top focus for Walz this budget is preventing taxpayer money from being misused. 5 EYEWITNESS NEWS reported on his executive order issued two weeks ago to create a state fraud investigation unit. That order came after five people were convicted in the first Feeding our Future trial last June. CLICK HERE for KSTP’s full coverage of the Feeding Our Future investigation.

“It’s simply unacceptable,” said Walz at the time of the order signing. “It’s maddening and it makes Minnesotans and myself angry about this.”

Walz is scheduled to present his budget proposal at 12 p.m. Check back for updates.

CLICK HERE for full political coverage from 5 EYEWITNESS NEWS.