MMB releases February forecast

Yesterday, Minnesota Management and Budget released the state's updated economic forecast. This is a key benchmark for the legislative session and will be the base for the FY2026-27 biennial budget.

Top-level summary:

Minnesota's budget outlook has been adjusted downward amid significant near-term economic and fiscal uncertainty. The FY2026-27 projected balance is now down to $456 million, which is $160 million lower than prior estimates. Higher forecasted inflation results in increased predicted revenues and expenditures. Spending growth outpaces revenue growth for the projections through FY2029. In addition, the projected general fund shortfall for the FY2028-29 biennium has grown $852 million since the November forecast for a total of $5.995 billion. Shifting policies at the federal level introduce significant uncertainty.

Limitations on the forecast:

The baseline forecast does include some tariffs, but does not include retaliatory tariffs
Forecasting less net international migration, which coupled with an aging population will limit the workforce
Forecast does not include federal worker layoffs or federal contract suspensions
MMB forecast documents:

Current Operating Budget Webpage
February 2025 Budget and Economic Forecast (PDF)
February 2025 Budget & Economic Forecast Presentation (PDF)