The newest budget forecast from the Minnesota Department of Budget and Management shows Minnesota’s budget outlook has improved amid significant near-term economic and fiscal uncertainty.
The FY 2026-27 projected balance is now $3.7 billion, $1.3 billion higher than November estimates. A slightly improved economic outlook drives a higher revenue forecast largely driven by more volatile sources of revenue. Spending growth outpaces revenue growth through projections for FY 2029.
The projected general fund balance for the FY 2028-29 biennium is now $377 million; however, a significant structural imbalance remains. Shifting policies at the federal level and missing or incomplete data due to recent federal government shutdowns introduce significant uncertainty to the projections.
This is the last substantial glimpse into state finances lawmakers will get before they ramp up their work in St. Paul.
The full report can be viewed online at the Department of Minnesota Management and Budget.
GOVERNOR INTRODUCES ANTI-FRAUD PROPOSALS
Last week, Gov. Tim Walz presented his proposals aimed at combating fraud in state programs. They focus on three main areas:
Better detection and oversight: A proposal to provide additional funding for the Managed Care Organizations (MCOs) and having staff within DHS dedicated to MCOs oversight. This also includes using technology to detect fraud earlier by using predictive analytics for pre- and post-payment review. Additionally, this includes ending appropriations to legislatively named grantees, with grants awarded through a competitive RFP process. It also proposes to add staff at Minnesota Management and Budget to independently review high-risk audit findings.
Strengthen Investigation and Enforcement Authority: This proposal would expand the Bureau of Criminal Apprehension’s (BCA) Financial Crimes and Fraud Unit and increase the number of investigators focused on Child Care Assistance Program fraud. It would also expand staffing within the Attorney General’s Medicaid Fraud Unit. In addition, the plan would expand the Responsible Contractor Law to disqualify individuals convicted of fraud involving public funds, preventing bad actors from creating new businesses to avoid accountability. The proposal would also expand subpoena authority related to identity theft and financial exploitation, broaden the definition of identity theft to include misuse of a person’s digital likeness, and increase the statute of limitations to seven years for certain financial crimes.
Increased Criminal Penalties: This proposal would increase penalties by 20% compared to existing theft laws and extend the statute of limitations for certain fraud-related crimes to seven years, beginning when fraud is discovered but no later than seven years after the crime occurred.
INDEPENDENT OFFICE OF INSPECTOR GENERAL
The bill to establish an independent Office of Inspector General, a significant proposal for addressing fraud in state programs, passed the Senate with bipartisan support last session, but was not passed by a tied House. While legislators from both sides of the aisle and the governor support the general concept of the proposal, disagreements over specifics are proving to be a hindrance. The proposal has continued to stall in the House this year.
The previously passed Senate version established an independent office with its own law enforcement division, but House Republicans and Democrats are divided on whether the office should have independent investigative authority or rely on the Minnesota Bureau of Criminal Apprehension’s financial crimes unit, with Republicans preferring the former and Democrats the latter.
Additional disputes with the bill involve the appointment of the Inspector General and funding levels for the office. The bill has failed to advance out of committee twice so far this session as negotiations continue.
FEDERAL MEDICAID PAUSE
Last week, Vice President J.D. Vance and CMS Administrator Dr. Mehmet Oz announced that the federal government would pause nearly $260 million in Medicaid payments to Minnesota as part of a crackdown on health care fraud. The state will have 60 days to provide evidence to CMS that Medicaid claims for the 1.2 million Minnesotans on Medicaid from the last quarter of 2025 are all legitimate for the funds to be unfrozen.
PERMANENT DHS COMMISSIONER
It was also announced last week that Interim DHS Commissioner Shireen Gandhi will stay on as permanent DHS Commissioner through the end of Gov. Walz’s term. Commissioner Gandhi took over in an interim capacity after Commissioner Jodi Harpstead, who served as DHS Commissioner for more than five-and-a-half years, resigned in January 2025. Commissioner Gandhi joined DHS in 2017 as Deputy Commissioner overseeing budget and financial operations.
IMPORTANT DATES
March 20, 2026: Eid Break
March 27, 2026: First and Second Committee Deadlines
March 27-April 7, 2026: Easter/Passover Break
April 17, 2026: Third Committee Deadline
May 18, 2026: Adjournment of Legislative Session
HELPFUL LINKS TO FOLLOW ACTION AT THE STATE CAPITOL
