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Ewald at the Capitol: Budget Forecast, Shifting Political Landscape

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BUDGET FORECAST

On Dec. 4, Minnesota Management and Budget (MMB) released the November budget and economic forecast, the first look into the state’s fiscal health before the 2026 Legislative Session. The forecast showed that Minnesota is on a solid fiscal footing for the current budget cycle. This is largely due to higher revenue than expected throughout the fiscal year and a favorable year-end financial close, which leaves the state with an expected $2.465 billion surplus in the current biennium. Longer-term projections, however, are less favorable. Rising costs in the health care sector and expected sluggish economic growth are putting pressure on the state’s outlook, leading to an anticipated $2.960 billion budget shortfall in the FY 2028–29 biennium. Despite these future challenges, the state’s general fund reserves remain robust, holding steady at the statutory level of $3.771 billion.

During a press conference on Thursday, Gov. Tim Walz and legislative leadership spoke about the new budget forecast. Gov. Walz and DFL leadership emphasized that Minnesota’s financial position remains strong, with a budget surplus, reserves, and economic growth outpacing much of the country; results they attributed to responsible budgeting. They said the negative outlook is a product of national economic trends resulting from changes at the federal level — including HR1, which Congress passed this summer. Republican leaders criticized the budget outlook, saying the projected deficits come from excessive spending during the DFL trifecta and inadequate oversight of fraud by the Walz administration. Several questions were asked about the impact of fraud on the forecast, which MMB representatives said is not factored into the forecast. Both sides spoke on the fiscal restraints they face going into the 2026 session, and the importance of addressing fraud in state programs.

Gov. Walz and legislators will use the November Forecast to develop potential budget proposals for a supplemental budget. The legislature is not constitutionally required to enact a supplemental budget, even with a budget surplus.
 

SHIFTING POLITICAL LANDSCAPE

The legislative landscape has shifted significantly this year due to special elections, retirements, and 2026 candidacies. Following is a summary of the developments so far.

Sen. Matt Klein (DFL, Mendota Heights), Sen. Eric Pratt (R, Prior Lake) and Rep. Kaela Berg (DFL, Burnsville) are running for the Second Congressional District seat — which is currently held by U.S. Rep. Angie Craig, who is running for U.S. Senate.

Speaker Lisa Demuth (R, Cold Spring) and Rep. Kristin Robbins (R, Maple Grove) will vie for the Republican nomination for governor. Rep. Heather Keeler (DFL, Moorhead) is running for the Seventh Congressional District. Rep. Elliott Engen (R, White Bear Township) and Rep. Dan Wolgamott (DFL, St. Cloud) are running for State Auditor. Lastly, Rep. Cedrick Frazier (DFL, New Hope) is running for Hennepin County Attorney.

The list of legislative retirements continues to grow with the recent retirement announcements of Sen. Alice Mann (DFL-Edina) and Rep. Tim O’Driscoll (R, Sartell). Previously announced retirements include Sen. Steve Cwodzinski (DFL, Eden Prairie), Sen. Rich Draheim (R, Madison Lake), Sen. Jeff Howe (R, Rockville), Rep. Sandra Feist (DFL, New Brighton), Rep. Erin Koegel (DFL, Spring Lake Park), Sen. Sandy Pappas (DFL, St. Paul), Sen. Jim Carlson (DFL, Eagan), Sen. Ann Rest (DFL, New Hope), Sen. Jeremy Miller (R, Winona), Rep. Kelly Moller (DFL, Shoreview) and Rep. Ron Kresha (R, Little Falls).

Legislative retirements and changes can be found here.

Two special elections to fill vacant House seats in Districts 47A and 64A will take place on Jan. 27, 2026, following writs issued by Gov. Walz. The seats became vacant when Reps. Amanda Hemmingsen-Jaeger and Kaohly Vang Her resigned to assume new roles: Hemmingsen-Jaeger after winning a special election to the state Senate, and Her after being elected mayor of St. Paul. The balance of power in the House will remain an even 67–67 split if Democrats hold both seats when the Legislature returns on Feb. 17. Primaries will be held on Dec. 16.

There have also been committee leadership changes. Rep. Erin Koegel (DFL, Spring Lake Park) will be co-chair of the House Commerce Finance and Policy Committee following the resignation of Rep. Kaohly Her. Rep. Koegel served as co-chair of the House Transportation Committee, and will be succeeded in that role by Rep. Brad Tabke (DFL, Shakopee).
 

HOUSE RESEARCH OVERVIEWS

The Minnesota House Research Department provides nonpartisan and neutral research to legislators, staff, and the public. They recently published an updated overview of Minnesota’s Medical Assistance Program, which includes summaries of eligibility requirements, benefits, funding, and program spending. You can find the report here: Medical Assistance.

House Research also published a guide for School Finance in Minnesota, aimed at educating legislators. This report can be found here: School Finance.
 

IMPORTANT DATES

Dec. 16, 2025: Special Primary Elections for Districts 47A and 64A

Jan. 27, 2026: Special Election for House Districts 47A and 64A

Feb. 17, 2026: Start of Legislative Session

May 18, 2026: Adjournment of Legislative Session
 

EWALD GOVERNMENT RELATIONS TOOLKIT

We are sharing content along with our updates to help you better understand the legislative process and how to engage effectively. From decoding how the Legislature works to learning how to advocate for your priorities, these resources are designed to support your advocacy every step of the way.

This week’s article provides a basic overview of how the State Legislature functions.

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HELPFUL LINKS TO FOLLOW ACTION AT THE STATE CAPITOL

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