Legislative leaders agree not to balance the budget

Last week we wrote about Gov. Walz’s budget proposal to the legislature and how it remains unbalanced. If adopted, his budget would spend $1.838 billion more than it takes in for 2026-27 and $2.518 billion more than it takes in for 2028-29. Walz uses one-time money left over from the $17.1 billion surplus in 2023 to square his accounts.

This week, House and Senate leaders responded with their own budget proposals. Unlike the governor’s detailed budget, the legislature begins the process by releasing what’s known as budget “targets.” Budget targets are a simple list of spending numbers broken down by committee in the Senate and House. For folks following along at home, the “targets” tradition in the legislature has several problems.

• Targets are presented as deviations from the current budget, not the total amount of spending in each category, adding confusion. For example, the Senate DFL target for K-12 schools is $0. Does that mean Senate DFLers plan to spend zero dollars on schools? Of course not. It means they plan to spend the same amount as last year. This is more than an accounting issue. It represents the flawed mindset of too many people at the capitol — that all current spending is righteous and good and provides the proper starting point for the next budget. 
• Unlike the detailed budget document presented by the governor, targets focus on the total spending in each category, leaving the details to be worked out later.
• Since targets are set by legislative committee, the Senate and House targets do not match up, making it impossible to compare the two.
• The target lists also don’t match state budget categories seen in the forecast documents, making detailed comparisons impossible.

It’s almost like they keep things confusing on purpose so the public can’t weigh in until a final agreement is reached at the last minute. We can’t be cynical enough.

House targets are structurally imbalanced

With that as background, here are the targets from the House of Representatives.

You’re hearing about them here first because they were released with little fanfare on Saturday. It’s a significant development in the 2025 session because these spending targets represent an agreement between House Democrats and House Republicans on how much will be spent in each category. That is a huge step toward passing a budget and ending the session on time, considering the chamber is tied 67-67.

The low-key Saturday release is odd. Perhaps they are embarrassed by the fact that even though there are significant budget cuts in some areas, a structural imbalance remains between revenue and spending.

Since the House target release does not explain how much they spend overall for each biennium, we’ll have to piece it together with what we know. The target sheet numbers are listed as “Change from Feb. Base.” We assume that means change from the February forecast from MMB. The February forecast predicted spending of $66.634 billion for 2026-27 and $71.862 billion for 2028-29. The spending reductions from the House target release are $1.160 billion and $2.609 billion respectively. With projected revenues at $64.494 billion and $67.882 billion, it appears the House budget will spend $980 million more than we take in for 2026-27 and $1.371 billion more than we take in for 2028-29.

Although these numbers close the gap between sending and revenue more than Gov. Walz’s plan, the structural deficit remains in the state budget. The House uses the same trick Walz used to balance the budget — onetime money left over from the 2023 surplus. I guess it’s too much to ask for this legislature and this governor to square up the budget and use onetime money for tax rebates or other one-time spending (like capital projects).

Senate Democrat targets

Senate Democrats also released budget targets last week. They used the same format as the House, a list of numbers representing deviations from base spending, not actual spending in each category.

Comparing just the totals (since their committee structure is different than the House), the Senate is proposing to cut $754,024 million in the 2026-27 biennium and $1.739 billion in the 2028-29 biennium. Using the same math, the Senate leaves the largest gap between spending and revenue with $1.386 billion in 2026-27 and $2.241 billion in 2028-29.

*Numbers in millions

These budget targets (and Walz’s actual budget) set the stage for the final two months of session. The argument will now focus on how to spend the money and where exactly to cut.