Dear neighbors,  

My main focus for today is to share my thoughts on the Minnesota Management and Budget (MMB) February budget forecast. This report is released twice a year, once in February and once in November. It gives us an idea of our financial standings as a state and makes projections about current and future surpluses or deficits. Let’s dig in! 

Last week, Minnesota Management and Budget (MMB) released its February budget forecast, giving us an updated look at the state’s financial position. While the short-term outlook shows higher-than-expected burden (your tax dollars received), the long-term picture remains concerning. We are still facing a structural deficit in the “out” years, meaning the state is projected to spend more than it brings in if current policies remain unchanged. That is not sustainable. 

It is important not to treat a temporary improvement as an opportunity to increase spending.  Let me repeat myself! It is important not to treat a temporary improvement as an opportunity to increase spending. The forecast makes clear that Minnesota’s outlook is heavily dependent on continued growth in the national economy. If that growth slows, our projections will change quickly. We should not build permanent commitments based on assumptions that may not hold true. The overall state budget has grown significantly in recent years, and even after some adjustments, spending remains elevated. 

A major factor in this discussion is where our money goes. When you combine Health and Human Services with K-12 Education, those two areas account for 73.5 percent of the entire state budget (see chart below). These are largely “must pay” obligations, meaning they are difficult to reduce quickly and are the most likely areas for budget deviations in the future. If costs in either category grow faster than expected, it produces an immediate and significant impact on the overall budget. That reality makes disciplined oversight and accurate forecasting even more critical. 

We also need to ensure spending reflects actual demand. For example, requests for services such as Non-Emergency Medical Transportation (NEMT) have declined by 62 percent. Translation: Claims for reimbursements from service providers to the State of Minnesota dropped by 62 percent. When usage drops at that level, budgets should be reviewed and adjusted accordingly. Allowing outdated projections to drive spending only adds to long-term imbalances. 

Fraud prevention must remain central to this conversation. Every dollar lost to fraud makes the structural deficit worse and puts more pressure on taxpayers. Conforming to federal program integrity requirements and establishing a strong Office of the Inspector General would help protect funds, reduce improper payments, and strengthen the state’s financial position. 

The February forecast provides helpful insight, but many factors remain uncertain. Economic growth, federal decisions, and spending discipline here at the Capitol will determine where we end up. Rather than taking risks, we should focus on responsible budgeting, reviewing high-cost areas carefully, adjusting programs when demand falls, and strengthening oversight. That approach will better protect taxpayers and improve Minnesota’s long-term fiscal stability. 

Coffee with Tom will be in Owatonna TODAY, Friday, March 6th at the Owatonna Chamber of Commerce building from 12:00pm-1:00pm. 

Next week, Coffee with Tom will meet in Waseca on Friday, March 13th at the Waseca Chamber of Commerce from 12:00pm-1:00pm. 

Thank you for your support and feedback!