At a hearing April 7, state Sen. John Hoffman, DFL-Champlin, introduced Senate File 3054 to the Senate Human Services Committee, which he chairs.
The legislation proposed to spend a little under $17 billion over the next two years from the state’s general fund. That money, combined with federal funding mostly through Medicaid, would provide mental health services, disability care, money for substance use disorder treatment centers and many other programs geared to the most vulnerable state residents.
But there was seemingly one hitch: No one else on the committee had read the bill.
“It came out right before the hearing, so we were starting from scratch,” said Jim Abeler, R-Anoka.
Except, Abeler explained in an interview, Hoffman’s timing was not unusual. Budget bills are often hammered out on evenings and weekends and given to lawmakers just prior to the hearings.
Welcome to the Minnesota state budget-making process. As a Minnesota state government reporter less than three weeks into the job, I have had an array of rudimentary questions about what is going on at the State Capitol now and how it will affect people across the state. So, I thought it would be helpful to share some of what I’ve learned so far.
What goal is the Minnesota Legislature currently trying to achieve?
State law mandates that the Legislature pass a bill that funds state government for the next two fiscal years (the fiscal year starts July 1) before it adjourns the third week of May. It must also be a bill that Gov. Tim Walz is willing to sign into law.
Where is the Legislature now in this process?
House and Senate committees are holding hearings this week on bills that fund certain departments or areas of government, while holding firm on targets hammered out by legislative leaders.
On the one hand, what is in the bills is rather fluid.
“We’re still waiting on a few fiscal notes,” Hoffman explained at the Monday Senate Human Services hearing. He then paused and added, “Like a whole bunch of notes.”
So, on Wednesday, the Senate Human Services Committee reconvened to go over an amended bill and take testimony, with 33 business trade groups, nonprofits, government agencies or individuals on the docket to testify.
On the other hand, the committees have a statutory deadline of this Friday to pass these massive spending packages.
Then, like college students heading to spring break after cramming for midterms, legislators will get a week off and return to the Capitol on April 21.
Wait … what are budget targets?
A target is a spending goal set by House and Senate leadership that committee chairs are required to adopt when writing budget bills.
In the instance of Human Services, the DFL-controlled Senate headed by Sen. Erin Murphy from St. Paul set a target of cutting $272 million from DHS in fiscal years 2026 and 2027 and trimming $430 million in 2028 and 2029.
The House, which due to its 67-67 tie has a leadership split between Speaker Lisa Demuth, R-Cold Spring, and Speaker Emerita Melissa Hortman, DFL-Brooklyn Park, has its own targets, which for Human Services are slightly larger cuts than the Senate’s.
Walz’s March budget recommendations also contain targets, and the governor’s Human Services target is similar to the House’s.
Some of the targets (like a separate spending bill dedicated to financing housing and homeless prevention) are pretty close together. In those instances, Senate committee chairs met with their House counterparts this week to hammer out a spending bill that reconciles the targets.
The Human Services targets are not close.
The House would like to see $1 billion chopped off the DHS budget in fiscal years 2028 and 2029, or $560 million more than the Senate. And the governor has proposed over $1 billion in cuts.
“Our battle isn’t here,” Hoffman said at the Monday Human Services hearing in the Minnesota Senate Building. “It is going to be across the street.”
All these bills target cuts because a budget forecast anticipates Minnesota running into a major revenue shortfall in fiscal years 2028 and 2029. More on that forecast in a second.
While not a legal requirement, it is state government practice to not make decisions about the biennial budget that are likely to cause an imbalance between revenue and spending three and four years down the road.
Related: The Minnesota four-year state budget forecast: sandbox designer, ‘truth-teller’
The second week of April is late to have significant gaps in targets.
According to the Minnesota Legislative Reference Library, Walz and the DFL-controlled Legislature agreed to targets by the third week of March in each of the last two legislative budget sessions. Why the targets have yet to be resolved this year should become apparent by the end of this story.
So, those targeted cuts, the spending decreases you gave are in comparison to the state’s current budget, right?
Wrong!
In crafting and negotiating a budget bill, the governor and Legislature are going off a forecast that came out this February from the Minnesota Management and Budget Department (MMB), a state agency whose commissioner, Erin Campbell, was appointed by Walz.
The forecast anticipates spending based on prior years. But it also factors in macroeconomic forces that may affect state revenue.
When MMB’s forecast predicted a $6 billion revenue shortfall by July 2027, the state’s first significant imbalance between revenue and spending since the Great Recession, it reset the conversation around writing a new budget.
Related: Looming state budget deficit’s cause is somewhere in between Trump’s ‘destructive chaos’ and DFL’s ‘irresponsible spending spree’
Where is MMB getting this information that everyone is basing their budget proposals on?
The 98-page forecast cites several sources, but the most influential one is S&P Global Market Intelligence (SPGMI), a subsidiary of financial information company S&P that the state hired as its macroeconomic consultant.
Throughout the early months of Donald Trump’s White House return, SPGMI reports have warned that Trump’s wildly fluctuating tariff proposals will lead to inflation and make the Federal Reserve leery about cutting interest rates.
“SPMGI projects a slowdown in the U.S. economy as tight monetary conditions due to elevated inflation constrain growth,” the MMB forecast reads. “Minnesota’s economy will likely follow a similar path.”
Besides this bad economic forecast, what are the other big obstacles in finalizing a budget by May?
There are two giant ones.
One is the uncertainty of federal funding. The Elon Musk-helmed Department of Government Efficiency has swiftly enacted cuts that may erode the grant-making power of federal agencies that Minnesota has relied upon for decades.
No agency relies more on the feds than DHS. The department’s 2025 fiscal year budget is around $31 billion, with $16 billion, or over half, paid for by the federal government.
The governor’s and Legislature’s budget proposals for DHS and other agencies assume modest cuts in federal funding. But lawmakers acknowledge they have no idea what to expect in federal money.
“No one knows anything,” Abeler said. “It is uncharted territory.”
How, then, can Minnesota pass its budget before Congress approves its own spending bills?
“I am trying very hard to not make that the elephant in the room,” said Murphy, the Senate majority leader, who emphasized that legislative leadership is planning for contingencies.
But some outcomes may just leave the state stuck.
“If, for instance, they make deep cuts to medical assistance, we don’t have the wherewithal to replace those funds,” Murphy said in an interview.
Walz has yet to step in with break-glass-in-case-of-emergency solutions. The governor did roll out Wednesday a website to track disruptions in Minnesota’s flow of federal funding.
What’s the other giant obstacle?
A tied House.
Fortunately, the 67-67 tie in the House between Republicans and DFLers is not unprecedented, as it occurred 46 years ago.
Unfortunately, the 1979 session was marked by DFL members trying to kick out Republican representative Robert Pavlak for alleged campaign finance violations, so as to secure a DFL majority.
Pavlak forcefully defended himself to the point that he collapsed while giving a speech on the House floor and was rushed to a nearby hospital. As Pavlak was recovering, he was removed from the House on a party line vote.
Oh, and the 1979 Legislature failed to pass a budget on time, necessitating a special session following the May adjournment.
Special sessions are somewhat common when there is any type of split in party control. The last special session was in 2021, when the DFL-controlled House and GOP-led Senate met to enact a balanced budget and extend Walz’s COVID-19 peacetime emergency order.
House members say they will work to be on time, even after the DFL caucus boycotted the first couple of months of the session, forcing the state Supreme Court to repeatedly intervene.
“It’s really important we leave our ideological battles to the side as we focus on completing a state budget for the people of Minnesota,” Hortman said at a press conference last week. “That is the job of this session.”
Editor’s note: Matthew Blake wrote this story for MinnPost.com.
This article first appeared on MinnPost and is republished here under a Creative Commons Attribution-NoDerivatives 4.0 International License.
MinnPost is a nonprofit, nonpartisan media organization whose mission is to provide high-quality journalism for people who care about Minnesota.
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