Minnesota Legislature to pass gloomy $66 billion budget

Yahoo

10-06-2025

Lights stay on inside the Minnesota State Capitol Building as the sun sets during a special legislative session Monday, June 9, 2025. (Photo by Nicole Neri/Minnesota Reformer)
The Minnesota Legislature was expected to pass the final bills comprising the $66 billion, 2026-27 budget in the early hours of Tuesday morning — an 8% decrease from the previous biennium.
With final passage of budget bills after a marathon 21-hour special legislative session, the divided Legislature was on pace to hit the most important deadline of all — June 30, after which a partial state government shutdown would commence, affecting schools, roads and social services.
The bleary-eyed finish late Monday and early Tuesday morning is a fitting end to a fitful session, which began just after a Democratic senator died in office, putting the upper chamber in a 33-33 tie, later resolved by a Democratic victory in a special session. T
he Minnesota Supreme Court was forced to settle a dispute between Republicans and Democrats over the control of the House after Democrats boycotted the Capitol for multiple weeks. Another special election brought the House into a 67-67 tie and a power-sharing agreement. A Democratic senator had her burglary trial delayed, and a Republican senator was arrested in a police sting and charged with one count of attempted coercion and enticement of a minor. Lawmakers adjourned on May 19 without a budget deal, which was followed by weeks of secret negotiations.
Lawmakers this session also confronted a tough fiscal reality: The state is spending more money than it's bringing in and is expected to blow through its reserves as soon as 2028. While tax revenues have regularly exceeded expectations, the cost of providing government services — particularly care for the elderly and disabled — has grown even faster.
'The budget we are passing will fund the services Minnesotans rely on to live their daily lives, including care for people with disabilities and seniors, maintenance for roads and bridges, funding for courts and correctional facilities, and support for veterans,' Senate Majority Leader Erin Murphy, DFL-St. Paul, said in a statement. 'We are making difficult but responsible decisions to reduce the budget without sacrificing core services.'
Senate Minority Leader Mark Johnson, R-East Grand Forks, who hopes to be the majority leader in 18 months, criticized the budget for not cutting spending and taxes. 'We are here today not because we agree with this budget,' Johnson said. 'Minnesotans deserve much, much better.'
Legislators could find themselves back in St. Paul later this year: Federal cuts — like those included in the Trump-backed One Big Beautiful Bill Act — could quickly put the state in a more dire financial position. In 2024, Minnesota spent $18.5 billion on Medical Assistance, Minnesota's Medicaid program, and the federal government covered $11 billion of that. Any Medicaid cuts on the federal level will have major ramifications for the state budget, especially DHS.
Many lawmakers are expecting to return to the Capitol sometime in the fall or winter for another special session to grapple with the steep cuts to Minnesota's budget once the federal cuts are signed into law, as expected.
Here's some key takeaways from the now completed budget, pending the signature of Gov. Tim Walz, who has 14 days after he receives them to sign or veto the bills passed during the Tuesday special session:
The budget is smaller than the record-breaking $72 billion two-year budget passed by the DFL-controlled Legislature in 2023, which was bolstered by the American Rescue Plan and other federal spending under President Joe Biden.
The budget bills take a step towards resolving the deficit projected to begin in the 2028-29 budget years, but don't avert it entirely. It closes the gap between revenue and spending by 45%, and will leave approximately $1.9 billion on the bottom line at the end of the biennium. But current projections — which are likely to change significantly based on the economy and federal budget — predict a $290 million deficit in 2028-29.
The budget will cut approximately $283 million from projected expenditures over the next two years, with most of the savings coming from the Department of Human Services.
Republicans, who control half of the House, won a major concession from the DFL: the repeal of MinnesotaCare eligibility for undocumented adults. The vote came after impassioned speeches from Democrats opposed to the bill. Rep. Kaohly Her, a St. Paul Democrat, said she was 'illegal' because her father lied on an immigration paper to expedite her family's journey to the United States, highlighting the desperate circumstances many immigrants find themselves in. She later clarified that she and her family are American citizens.
Lawmakers opted not to give agencies a bump in funding to cover inflation, except for areas of the budget where inflation is built into funding formulas, like education and some areas of DHS. The move saves money across the budget, but will squeeze state agencies as the cost of providing services outpaces their funding.
The budget holds education funding steady for the next two years. It also funds pay raises for home care and nursing home workers.
The Legislature was also expected to pass a $700 million infrastructure package to pay for upgrades to the state's roads and bridges. The package, known as a bonding bill around the Capitol because it's funded with borrowed money, requires a three-fifths supermajority to pass. It was expected to garner enough votes to pass, though as one of the last bills.