A new state budget forecast gives a stronger financial outlook for Minnesota, but top elected officials cautioned that uncertainty surrounding federal funding and program fraud are still points of concern.<\/p>\n
The report from the Minnesota Department of Management and Budget released on Friday<\/a> shows February\u2019s projected balance is now $3.7 billion for the 2026-27 fiscal year.<\/p>\n It\u2019s nearly $1.3 billion higher than the November estimate, which forecast a $2.5 billion surplus. <\/p>\n RELATED: Minnesota budget forecast shows nearly $2.5B surplus in short-term, $3B deficit looming<\/a><\/p>\n The projected general fund balance for the 2028-29 biennium now flips a previously forecast $3 billion deficit to a $377 million surplus.<\/p>\n \u201cThe State of Minnesota is on strong financial footing,\u201d Management and Budget Commissioner Erin Campbell said during a news conference on Friday. \u201cDespite structural imbalances, we expect to end this biennium and the next with a positive balance. That\u2019s a big improvement from November.\u201d<\/p>\n State officials partially attribute the improved financial outlook to more tax revenue from capital gains, interest income and corporate profits. Campbell cautioned lawmakers about uncertainty ahead as they plan how to spend tax dollars this session.<\/p>\n \u201cContinued federal funding uncertainty could have impacts on our general fund bottom line \u2014 and any spending this biennium will impact the positive balance,\u201d she said.<\/p>\n Gov. Tim Walz agreed that Friday\u2019s report was positive on its face, but he took a wary approach to spending this legislative session.<\/p>\n \u201cBe fiscally conservative, focus on the things that make a difference, focus on the things that are growing our economy, creating the surplus, and helping peoples\u2019 lives, but be very thoughtful,\u201d the governor said.<\/p>\n How fraud affects the bottom line<\/p>\n While fraud is a concern in conversations around Minnesota\u2019s finances, it isn\u2019t accounted for in the budget outlook numbers. But the scandal\u2019s residual impacts \u2014 like the Centers for Medicare and Medicaid Services pausing $259 million in quarterly Medicaid funds over fraud concerns \u2014 loom large.<\/p>\n As the Trump administration pinches federal funds destined for Minnesota\u2019s Medicaid-based programs, Minnesota Budget Director Ahna Minge says losing on appeal could force the state to spend billions of dollars it hasn\u2019t budgeted for.<\/p>\n \u201cIn general, if we lose, we don\u2019t know when the withholding would start,\u201d Minge said. \u201cWe don\u2019t know how many quarters it would be withheld, so it\u2019s hard to say for certain, but a loss of $515 million in federal funding would mean an increase in state spending of $515 million, so on an annual basis, that\u2019s about $2 billion dollars.\u201d<\/p>\n RELATED: Federal government halts $260M Medicaid funds to Minnesota over fraud<\/a><\/p>\n Walz continued to criticize the federal government\u2019s threats to cut funding, which could impact the state\u2019s budget.<\/p>\n \u201cI am deeply concerned, too, that there are those that their answer to stopping fraud is to cut the program. The reason we have such a great state and we\u2019re having people move in, and we\u2019re seeing surpluses is because we have these programs,\u201d said Gov. Tim Walz.<\/p>\n Republicans say this is a step that can ensure accountability.<\/p>\n \u201cThere are things we can do at a state level that will help us avoid any cuts, but when we\u2019re looking at fraud and it has gone on for years under the current administration, there needs to be a level of responsibility that when it wasn\u2019t taken at a state level, the feds are going to help us make sure there is not more fraud going on,\u201d said House Speaker Lisa Demuth, R-Cold Spring.<\/p>\n Since the session started on Feb. 17, both sides have introduced legislation to combat fraud, including a proposal to create a new inspector general position.<\/p>\n RELATED: Gov. Walz unveils new anti-fraud legislation package<\/a><\/p>\n RELATED: Inspector General bill remains stalled in Minnesota House<\/a><\/p>\n RELATED: Minnesota lawmakers under pressure to combat fraud this session<\/a><\/p>\n