ST. PAUL, Minn. (FOX 9) – Minnesota has a couple of years to go before a big budget mess that’s inevitable without some big changes.

Black and blue budget

Into the red:

Unless the state taxes more or spends less, it’ll be in the black in 2027, but staring at a growing $6 billion deficit by 2029.

That projected deficit is up almost $900 million since the last forecast in December, mostly from inflation, so Democrats blame President Donald Trump.

But Republicans say the DFL trifecta had already run the state down the road from a huge surplus to a sizable projected deficit.

“Well, the devil will be in the details,” said Erin Campbell, Minnesota Management and Budget commissioner.

The details in Minnesota’s budget projections keep getting worse.

Focus on the numbers the state reported for 2027 starting February 2024.

“The Minnesota Management and Budget office is forecasting a $3.7 billion budget surplus by the end of fiscal year 2025 and $2.2 billion after 2027,” the state reported.

Ten months later, there was a reported surplus that was expected to shrink significantly because of the rising cost of commitments to spending, mostly on education and health. 

“Gov. Tim Walz says the budget is still balanced with more than $600 million in surplus by the end of 2027,” FOX 9 reported in December.

Now the leftover pot of cash at the end of 2027 is down to $456 million and state economists are projecting a $6 billion deficit by 2029.

Blame game

What they’re saying:

“Basically, the only thing that’s changed since November is, is Donald Trump’s chaos to the economy,” said Walz. “It changes day to day. It provides the uncertainty that we don’t need.”

But that projected 2029 deficit was already more than $5.1 billion before Trump took office.

“Democrats in the state, as you have heard, want to go ahead and blame anyone else for the damage that has happened to our state budget,” said Speaker of the House Lisa Demuth, (R-Cold Spring). “But this was an irresponsible spending spree.”

Could get worse

Elements of uncertainty:

And the problem could get way worse or maybe better soon.

The state’s financial experts say their forecast could dramatically change based on shifting federal policies, disruptions from federal agency closures, and inflation.

“We’ve chosen to highlight the uncertainty, the uncertainty, because it does feel really significant in this moment,” Commissioner Campbell said.

And now the rhetoric takes a backseat and the real work starts.

Legislators should get budget targets based on this forecast, and they have about two months to put together the budget.

For many Minnesota families, housing costs eat up more of their budget than anything else. A bipartisan group of state lawmakers say they have a blueprint to fix that. 

On Wednesday, the coalition — which includes conservatives and progressives from the Twin Cities metro and Greater Minnesota — announced a package of bills to tackle what they call a crisis. The state is more than 114,000 affordable homes short of the need, according to the Minnesota Housing Partnership. 

Half of all renters are considered “cost-burdened,” meaning they spend more than 30% of their monthly income on rent, which represents more people than at any other time in the last decade, the group’s latest report said. 

“We hear it all the time: Housing costs too damn much,” said Rep. Mike Howard, DFL-Richfield. 

The bills have yet to be published, but the legislators said the proposals will cut down on red tape in order to build more starter home options — like townhomes and duplexes — and ensure they’re approved by cities in a timely manner by streamlining that process.

Another plan would require local governments to allow more options in commercial areas. Notably, Minneapolis recently loosened its rules so vacant office space could be converted into apartments. 

Others focus on lifting parking directives and removing aesthetic requirements — the mandated use of premium products as the minimum construction standard — that supporters say are barriers to development. 

“As I have said in the past, housing is a North Star issue. Every person needs to find their way home — like my kid in the Navy always told me, I know I can go home to our North Star in Waconia,” said Rep. Jim Nash, R-Waconia. “There are so many people that don’t have that opportunity right now, so Republicans and Democrats and progressives and liberals are all saying, ‘Let’s fix this.’”

Last year, legislation aimed at the same goal failed to get enough support to pass. This group says these bills are different and answer concerns from cities. The proposed changes do not force development where core government services cannot support that expansion, for example. 

“That’s one thing that we heard loud and clear from cities is that we want to have more choice and to apply these reforms in the way that makes sense for our communities. And these bills reflect that,” Howard said. 

Minnesotans need to make nearly $100,000 a year to afford a median-priced home, the Minnesota Housing Partnership detailed in its report. Meanwhile wage growth has not kept pace with the increase in rent and the price of a home.

The proposals are only policy changes, meaning they don’t impact the state budget, which will face some constraints this year as lawmakers try to spend wisely to avoid a $5 billion deficit in future years.

The latest economic forecast data — about the state’s budget outlook — comes out on Thursday.