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Minnesota lawmakers will get a key update this week that will inform debates about the next two-year budget. But it won’t include much on a variable likely to shake up their plans: President Donald Trump.

State finance officials deliver their economic forecast on Thursday; it’s the report that will set the tone for upcoming deliberations over a two-year budget. But State Budget Director Ahna Minge said the calculations won’t include pending cuts by the Trump administration or legislation moving through Congress could trickle down to Minnesota.

But that hasn’t alleviated concern about the impact of decisions by Trump and Republicans — now with full control in Congress — could have on Minnesota’s spending plan.

“We cannot ignore the elephant in the room that could dwarf any state problems and could confuse everything we’re doing,” Senate Finance Committee Chair John Marty, DFL-Roseville, said last week. “It’s just too many things happening at once. And economists, they work off projections based on what’s happened in the past, and there’s nothing like this has happened before,” 

Democrats said they were preparing to tackle a potential $5 billion shortfall down the road, but now they’re worried that could be multiplied. They cited layoffs of federal workers, proposed cuts that could impact Medicaid funding and potential impacts of tariffs that Trump has imposed or threatened as factors that could shock the state’s economy.

Republicans have said the federal changes could have an impact but they argue voters asked for a shakeup when they elected Trump. Sen. Glenn Gruenhagen, R-Glencoe, said he’s glad to see efforts to trim federal spending.

“It’s time to have an overhaul, or the people we’re trying to help are going to suffer much worse when we hit a wall of financial bankruptcy,” Gruenhagen said.

Republicans also contend Democrats were pointing out concerns about the federal government to distract from the state’s current financial situation. 

“I think we’re looking for a headline here and a distraction,” said Sen. Rich Draheim, R-Madison Lake. “We should be looking in our own mirror. We have our own problems here that we have to work through together. It has to be a bipartisan solution.”

Democrats approved a $72 billion budget back in 2023 that included a good amount of one-time spending. The temporary spending falls away unless lawmakers extend programs. If ongoing spending levels hold steady, lawmakers would have about a $66 billion budget for the next two years.

A group of legislative Republicans sent a letter last week to GOP members of Congress asking them not to pass big cuts for health care funding. They said the plan could negatively impact Minnesota’s budget. But the House passed a budget blueprint within days that calls for making big cuts.

Both parties agree lawmakers in Minnesota will need to consider budget cuts to bring down a projected shortfall down the line. Republicans have pushed for agencies to look for places where they could reduce funding. Lawmakers from both parties have proposed bills that could root out waste and misuse of state tax dollars.

Gov. Tim Walz recommended scaling back funding to disability services over time. It’s a tough move and one for which he’s facing blowback. But he thinks it’s a way to trim spending that’s been growing at a rapid clip.

But Walz said if Congress makes big trims to funding streams the state relies on, things could get a lot more complicated.

“What we’re proposing is small peanuts in trying to balance that budget compared to what would need to happen. We were doing that in a normal budget environment predicated on just level funding, if they follow through with this we’re going to have to reassess on that and then fix what we propose,” Walz said.

The state is due to receive almost $23 billion this year in federal funding. Minge, the state budget director, said state lawmakers would have to weigh cuts or new taxes if any of that federal funding is cut or redirected.

She said 12 programs have had their federal funding disrupted since Trump took office in January. Award funds directed to Departments of Commerce, Natural Resources and Agriculture are currently inaccessible.

Minge said the state is working to navigate the outages, along with additional executive orders but the changes are a “significant departure” from what Minnesota agencies are used to.

“The availability of federal funding is very fluid, and status has changed from day to day, and some programs we’ve had access restored and later shut off again,” Minge told the Senate Finance Committee last week. 

“We are continuing to hear about state agencies who are being notified that additional programs are under review,” she continued. “So we are just monitoring this very closely and working with our partners across the state enterprise.”

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Legislators are already weighing the ways they might have to bridge budget gaps if federal officials cut funding streams to Minnesota. A new economic forecast is released on Thursday.

Minnesota lawmakers get budget update that won’t include full scope of Trump federal pullbacks

Tim Evans for MPR News

A man wearing a suit walks while holding papers

Minnesota lawmakers get budget update that won’t include full scope of Trump federal pullbacks

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