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On March 17, Gov. Tim Walz released his 2026 budget recommendations.
Unlike a biennial budget, which is constitutionally required to pass during every odd-numbered year, this is a supplemental budget, which is optional. As a result, this proposal serves as the governor’s suggested roadmap and starting point for negotiations during the remainder of the legislative session. Here is a one-page summary document and one-page spreadsheet from the governor’s office. A more detailed 42-page “Accounts by Agency”document includes all budget items, as well as policy changes that carry no fiscal impact but remain part of the broader package.
In a press release, the governor’s office said the proposal “prioritizes lowering costs for middle-class families, helping Minnesotans through workforce disruptions caused by artificial intelligence, and responding to Operation Metro Surge, while making responsible cuts to continue Minnesota’s record of balanced budgets.”
An overview of key provisions follows.
Tax Relief & Economic Policy
- Expand the Dependent Care Tax Credit by increasing maximum eligible expenses by $3,000 (one child) and $6,000 (two or more children under age 5)
- Reduce the statewide sales tax rate by 0.075%, and expand it to include services like accounting, banking, and law
- Establish a council to study the future AI economy
- Implement a new social media tax on large technology companies
Response to “Operation Metro Surge”
- Provide rental assistance for impacted individuals
- Offer small business loans to businesses affected by the surge
- Create a $10 million emergency fund to respond to future impacts
Public Safety & Gun Policy
- Assault weapons ban
- Close the “ghost gun” loophole
- Enhance State Capitol security
- Increase penalties for impersonating a police officer
- Expand mental health and school-based safety resources
Fraud Prevention
- Increase statewide fraud detection efforts
- Modernize outdated IT systems at the Department of Human Services
- Expand staffing in the Attorney General’s Medicaid Fraud Unit
The governor’s proposed budget aims to reduce projected state spending by $370 million in fiscal year 2029, cutting the structural deficit by nearly 20%. Under the proposal, the state would maintain an estimated $1.8 billion balance heading into the FY 2028–29 biennium.
The governor also noted the state is projected to carry forward a $3.7 billion balance in the current biennium and nearly $800 million in the next, while acknowledging that “tough choices” are necessary to maintain long-term fiscal stability. Much of his proposed savings come from cuts to long-term care and special education transportation funding.
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