Star Tribune
Why Minnesota could soon face a budget shortfall
The good news delivered by Minnesota leaders Wednesday is that the state projects a $2.4 billion surplus for the two-year budget cycle that began in July.
Then came the bad news: Lawmakers might not get to spend it, a disappointing revelation for constituencies who are amassing legislative wish-lists.
How could that be? The surplus will be consumed in the coming years by rising costs of state services, such as long-term care for people with disabilities and free school meals for everyone. If lawmakers spend the surplus elsewhere, state officials said, Minnesota could face a $2.3 billion shortfall starting in July 2025.
Gov. Tim Walz and legislative leaders have acknowledged they must show some fiscal restraint when they return to the State Capitol in February. This year, the DFL-controlled Legislature used a much larger $17.5 billion surplus to pass a slate of progressive policies and a two-year $72 billion budget — the largest in state history.
GOP legislators blamed Walz and the Democrats last week for the projected deficit, saying they squandered the larger surplus and put the state in a financially precarious position.
Minnesota Management and Budget Commissioner Erin Campbell said “some of the drivers come from decisions that were made last legislative session, but that’s just a part of the story.”
Her department’s lengthy economic forecast report shows a mix of factors. Here’s what’s driving Minnesota to swing from a projected surplus into a shortfall, according to the state budget agency.
Education spending up
FY24-25 projection: $205 million above budget
FY26-27 projection: $112 million above budget
Enrollment in Minnesota schools is about 5,000 students higher than expected, state officials said, and many of them are non-English speaking pupils who require more help.
A universal school meals program offering free breakfast and lunch to all Minnesota students is costing more than anticipated, too. The program, which the Legislature created this year, was initially forecast at about $400 million over two years.
The free meals are more popular than the state anticipated. The program is estimated to cost an additional $81 million over the next two years and $95 million more in the subsequent fiscal biennium, Campbell said.
The governor said he would not entertain scaling it back.
“We’re seeing more children get healthy meals in school so they’re ready to learn,” Walz said. “That’s an investment that I will defend all day.”
Rising health and human services costs
FY24-25 projection: $495 million above budget
FY26-27 projection: $564 million above budget
A sizable projected increase in health and human services spending stems mostly from rising costs of home- and community-based care for people with disabilities, state budget officials said.
Home health aides and other long-term care services provided in lieu of nursing homes are projected to cost $355 million more than previously estimated in this current two-year budget cycle and $513 million more in the next fiscal biennium.
More Minnesotans are using these services while the costs of providing them are rising.
“We have seen increases in both the number of people being served for these programs as well as the average cost per person,” state budget director Ahna Minge said.
Unforeseen costs?
Mark Haveman, executive director of the nonpartisan Minnesota Center for Fiscal Excellence, said legislators must resist thinking of the latest $2.4 billion surplus as a “mini windfall” to spend.
“We need to be really, really cautious,” he said.
Haveman said he’s concerned that officials might be underestimating the cost of future state employee labor contracts, which could change the budget projections.
A Minnesota Management and Budget spokesman said the latest economic forecast tries to account for labor contract increases by incorporating inflationary estimates.
But Haveman said state officials are assuming an inflationary growth rate of 2.2% in fiscal year 2026 and 2.4% in fiscal year 2027. Future labor contracts will likely include larger pay increases than that, he said.
“Employment cost growth is higher than the standard inflation that they’re measuring,” Haveman said.
He said Minnesota is poised to grow its government workforce at the same time, with more employees needed to run newly created initiatives, such as a state-paid family and medical leave program, and an office to oversee the legal marijuana market.
Walz and DFL legislative leaders said they hope the budget they enacted this year will help stimulate the economy with increased workforce participation and reductions in child poverty.
They said increased local government aid will help keep down property taxes, a new child tax credit will help cut poverty and the free school meals program will amount to a “lunchbox tax cut” for Minnesotans.
State economist Laura Kalambokidis said those initiatives “may be creating benefits now.”
“But it takes a while before it shows up in the economic data,” she said. “I need to see the economic data showing evidence of increased labor force participation, things like that.”
Other buildings destroyed at Khojir and Parchin likely included buildings where Iran used industrial mixers to create the solid fuel needed for its extensive ballistic missile arsenal, Eveleth said.
In a statement issued immediately after the attack Saturday, the Israeli military said it targeted ”missile manufacturing facilities used to produce the missiles that Iran fired at the state of Israel over the last year.”
Destroying such sites could greatly disrupt Iran’s ability to manufacture new ballistic missiles to replenish its arsenal after the two attacks on Israel. Iran’s paramilitary Revolutionary Guard, which oversees the country’s ballistic missile program, has been silent since Saturday’s attack.
Iran’s overall ballistic missile arsenal, which includes shorter-range missiles unable to reach Israel, was estimated to be ”over 3,000” by Gen. Kenneth McKenzie, then-commander of the U.S. military’s Central Command, in testimony to the U.S. Senate in 2022. In the time since, Iran has fired hundreds of the missiles in a series of attacks.
There have been no videos or photos posted to social media of missile parts or damage in civilian neighborhoods following the recent attack — suggesting that the Israeli strikes were far more accurate that Iran’s ballistic missile barrages targeting Israel in April and October. Israel relied on aircraft-fired missiles during its attack.
However, one factory appeared to have been hit in Shamsabad Industrial City, just south of Tehran near Imam Khomeini International Airport, the country’s main gateway to the outside world. Online videos of the damaged building corresponded to an address for a firm known as TIECO, which advertises itself as building advanced machinery used in Iran’s oil and gas industry.
Some take him up on it and fret when he’s not around.
“It is nice to be missed and be part of the school’s culture,” Arzola said. But mostly, he added, he wants kids to know that police aren’t around just for when the bad stuff happens. He’ll hand out his stickers and bracelets, even a trading card bearing his image. Then, they’ll talk about dogs and family.
School resource officer Al Arzola talks to students in his office at John Adams Middle School in Rochester on Oct. 11. (Leila Navidi/The Minnesota Star Tribune)
Two months ago, Rochester played host to a three-day training session for new SROs from across the state — an event organized by the Minnesota School Safety Center. On the final day, the 26 officers learned about surveillance challenges at the other school where Arzola works: Dakota Middle School.
It is a beautiful building with a scenic view. There is a lot of glass, too. Arzola, handling the role of instructor and tour guide, took the group outside and noted how one could look straight through the entrance to the large groups that gather inside. There were no curbs in front, either.
“There is nothing stopping any vehicle whatsoever from going through my front doors,” Arzola told the officers. “Law enforcement wasn’t talked to before this building was made. It was kind of like, ‘Here it is. You’re the SRO. Do what you do.’”
He showed them his office, too, which is separate from the main office and near those of other school support staff members. That makes sense, said Jenny Larrive, SRO coordinator for the Minnesota School Safety Center, given than SROs spend more time connecting with youth than on actual law enforcement.
“The basic rule in Minnesota is you cannot preemptively post law enforcement at a polling place,” he said. “A city can’t say, ‘Wow, Precinct Two, there’s a lot of intensity there, let’s just put a cop at the door.’”
Simon doesn’t go deep into the details on security, though. “I don’t want to give a total road map to the bad guys,” he said.
But testimony at the Capitol last year on behalf of the new law bolstering protections for election and polling place workers indicated there’s room for concern. One election worker was followed to her car by an angry voter; the head of elections in another county was called repeatedly on her home phone during off hours, and an official was lunged at by an aggrieved voter, forcing her to call the local sheriff.
Those who violate the law could now face civil damages and penalties of up to $1,000 for each violation.
The Brennan Center survey indicated more than four in 10 election leaders were concerned about recruiting enough poll workers due to threats of harassment and intimidation. This includes doxing — publishing a person’s personal information online in a threatening manner — and swatting, fake emergency calls that result in an armed response being sent to someone’s home.
“Election officials are working to prepare for everything right now,” said Liz Howard, director of partnership engagement at the Brennan Center. “More than 90% of election officials have made improvements to election security since 2020.”
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