Minnesota lawmakers eye potential impacts of federal budget proposals on state

ST. PAUL — The Minnesota Senate Finance Committee spent some of Thursday morning

analyzing proposed budget

cuts from the U.S. House’s budget resolution passed Tuesday, Feb. 25, and how they could affect the state’s budget moving forward.

Minnesota Management and Budget representatives on Thursday, Feb. 27, advised committee members of potential hurdles. State lawmakers must pass a budget this session, and with a federal budget proposal that asks for

$2 trillion in spending cuts

, they are unsure of what that means for the state’s budget.

Under the proposed federal budget, the U.S. House Committee on Energy and Commerce, which oversees the national Medicaid program, would need to make $880 billion in cuts.

“I want to be clear about what we’re talking about — the numbers of $880 billion in potential cuts to Medicaid — I have severe concerns about that, as do many Minnesotans,” Sen. Liz Boldon, DFL-Rochester, said at the hearing. “That’s not just numbers on a spreadsheet. That is care for people, that is seniors, that is children, that is people with disabilities, that is care that people need and deserve.”

Minnesota’s budget forecast in November showed a looming

$5 billion deficit by 2028

, after coming off an

$18 billion surplus in 2023

. A new budget forecast is expected this week, but Ahna Minge, MMB state budget director, clarified that the new forecast does not include pending cuts from President Donald Trump’s administration or the federal budget, which has only passed the U.S. House.

Under the current operating budget for 2024-25, the state has a total of $119 billion in revenue, with 34% coming from federal funds. In 2025 alone, the state has budgeted $23 billion in federal funds — including $11 billion for Medicaid — according to MMB’s presentation last week.

Dave Greeman, chief financial officer of the Minnesota Department of Human Services, said the impact on Medicaid is still unclear, but if that reduction is distributed proportionately across all states, Minnesota could see a loss of $1.2 billion to $1.6 billion in federal Medicaid funds in 2027.

“I think it’s safe to say that the loss of billions of dollars in federal Medicaid funding would significantly impact the state’s financial position,” Minge said. “So the example that Mr. Greeman provided … that’s about $1.2 to $1.3 billion a year, so about two and a half billion dollars a biennium, which is not something that the general fund is able to absorb.”

Medicaid currently covers about

1.4 million Minnesotans

— almost a quarter of the population — including nearly 600,000 children, according to the Minnesota Department of Health.

The state has also budgeted $1.6 billion in SNAP funding in 2025. The federal budget proposal

called for $230 billion in cuts

from the Agriculture Committee, which oversees SNAP.

In Minnesota, SNAP provides food assistance for 456,000 low-income Minnesota families with children, seniors, adults with disabilities and other adults, with an average benefit amount of $6.16 per day.

After the presentation by MMB, Sen. Rich Draheim, R-Madison Lake, said that while some “what if” discussions are good to have, he wants more focus on the state budget rather than proposed federal budgets.

“We’re looking for a headline here and a distraction,” he said. “We should be looking in our own mirror … We have our own problems here that we have to work through together. It has to be a bipartisan solution.”

Sen. John Marty, DFL-Roseville, said the presentation was warranted given the scope of the proposals being made at the federal level.

“Those are huge numbers,” he said. “We just needed to have a presentation on this so we have better preparations to put our budget together with that … This is unprecedented. I think people want change at times, but planned, thoughtful change that makes sense.”

Gov. Tim Walz has proposed a plan to “make insurance companies pay their fair share.”

Under the proposal, announced in a press release Thursday, insurance companies would be required to create a fund that covers high-cost procedures. Walz’s proposal would also increase the surcharge on health maintenance organizations from 0.6% to 1.25% of “total premium revenue.”

“This is a case where the state can and will shore up against some of the most drastic, and, quite honestly, to me, some of the more cruel cuts that are coming out of the federal government,” he said at a press conference Thursday afternoon.

Walz said the proposal would shift the responsibility for the state share of reinsurance to insurers rather than taxpayers.

“We’re simply asking our health insurance companies to help with that bill,” he said. “Means that we can save the money in the general fund to make up for the cuts that are coming to Medicaid and to some of the things that we know Minnesotans are going to need.”