What the State Budget Numbers Reveal After the November Forecast
Minnesota’s November budget forecast, released last week, offered lawmakers and the public an updated snapshot of the state’s financial position. While forecasts tend to focus on topline surpluses or deficits, the more important story lies in how recent budget decisions are playing out across state government, especially in K-12 education. The education budget provides a clear example of how large spending increases, new mandates, and long-term cost pressures are reshaping the overall budget outlook.
During the 2023 legislative session, lawmakers significantly increased the K-12 education budget. That budget cycle funded fiscal years 2024 and 2025, which ran from July 1, 2023 through June 30, 2025. Minnesota is now operating in fiscal year 2026, meaning many of those decisions are already embedded in ongoing costs.
In calendar year 2023 alone, the Legislature increased the K-12 budget by $2.3 billion. Of that amount, approximately $1.8 billion went directly to school districts. At the same time, the Minnesota Department of Education received a 21 percent budget increase, including funding for 40 new full-time equivalent employees.
Those funding increases came alongside a substantial expansion of requirements placed on local districts. During the same budget cycle, lawmakers imposed more than 65 new mandates on independent school districts. Some summaries count more than 80, though some overlap and can be combined. Even using the conservative figure, the scale of new requirements is significant.
Personnel costs already represent the largest operating expense for school districts, and recent policy changes have accelerated those costs. The one-time funding increase helped districts absorb new requirements such as Earned Sick and Safe Time, preparation for Paid Family and Medical Leave, and unemployment insurance payments for seasonal employees. Workers such as bus drivers and lunchroom staff are now compensated over summer months when school is not in session.
While these policies are intended to benefit school employees, the long-term sustainability question remains. These personnel-related costs are ongoing and are growing faster than the general fund. Once one-time funding is exhausted, districts are left managing permanent obligations with limited flexibility. Over time, that pressure can crowd out classroom spending or force local levy increases.
The education budget also illustrates a larger structural reality in state government. K-12 education and Health and Human Services are Minnesota’s two largest budget areas. Together, they account for roughly $49.7 billion out of a $66.9 billion total budget, or more than 74 percent of all state spending. Think about these numbers. Two portions of the General Fund budget represent 74 percent of all state spending. Decisions made in these two areas largely determine the state’s long-term fiscal health.
Thus, the November forecast highlights that Minnesota has a spending problem, and we must correct our course quickly. Large spending increases in 2023 paired with expanding mandates and permanent cost commitments reduce flexibility in future budgets, particularly if economic conditions soften.
In summary, the budget November forecast depicts moderate economic growth in future years beyond our current budget. The forecasted economic growth will not keep up with the spending commitments and mandates passed during earlier sessions when we had a surplus. In 2025, we worked to cut spending, but the size of our state government is still too big. We need to reduce the size of government and eliminate fraud to enable our investment in K-12 Education and valid Health and Human Services programs. When spending increases, staffing expansions, and mandates move faster than revenue growth, today’s surplus can become tomorrow’s deficit, for years down the line.
Rep. Tom Sexton, House District 19B