I’m not kidding. Earlier this month, Minnesota state budget officials presented their latest state budget forecast, and as our own Martha Njolomole reports,
Minnesota’s budget deficit has very little, if anything, to do with what is going on in Washington, D.C, as some claim. Minnesota’s fiscal problem is not only worse than what the headline numbers show, but it has also been going on since the end of the 2023 session.
So, what is causing this slow-motion fiscal disaster? In a single word, fraud.
Minnesota state government operates its budget in two-year cycles called “biennia.” The forecast for the Fiscal Year 2028-29 cycle shows a projected deficit of almost $3 billion (with a “b”). Constitutionally, state government can’t run a deficit (unlike the feds), so taxes must be raised to cover any shortfall.
Why not just cut spending to balance the books? I’ll get to that.
In this latest forecast, the FY28-29 outlook worsened by $2,316,000,000 since the date the budget was passed just six months ago. Some of that shortfall is attributable to reduced revenue projections ($570,000,000, page 15). The real problem lies in increased spending ($1,746,000,000, p. 17). Of the increased spending, the bulk (almost 80 percent) lies in a single budget area, Health & Human Services, scheduled to increase by an unexpected $1,362,000,000 during the FY28-29 cycle.
Digging deeper into the Health & Human Services category, almost all of the FY28-29 unexpected increased spending ($1,346,000,000, page 8) is driven by a single line-item, “forecasted programs” within the state Dept. of Human Services (DHS).
To oversimplify, “forecasted programs” is a euphemism for entitlement social welfare spending. These programs don’t have a set budget, the money continues to be paid out to anyone and everyone who is eligible. The only way to control this spending is to limit eligibility or to discontinue individual programs within the Department. The forecasted programs line item at DHS is where much of the multi-billion-dollar fraud has taken place.
During the state budget presentation back on December 4, state budget officials took questions from media in attendance (YouTube video available here). An extraordinary sequence can be heard beginning at the 40-minute mark.
Reporters asked the question where in the budget do the fraud numbers appear? KTSP-5’s Tom Hauser reported from inside the room,
You read that correctly, past fraud is now just baked into the spending numbers. In budget jargon, past fraud is now incorporated into the spending baseline, treated as if it will continue forever.
For the first time, Walz is acting tough on fraud and federal prosecutors continue to go after individual fraudsters.. To the extent that anti-fraud efforts are successful, will taxpayers see any benefit?
Will there be any anti-fraud dividend (tax cut) funded by lower fraud spending? Or will the windfall money merely be shifted by state bureaucrats to other spending items to justify their bloated budgets and head count?
The world is watching.