New state budget forecast highlights opportunity for growth

By Doug Loon
President and CEO
Minnesota Chamber of Commerce

A week ago, last Friday, the state’s budget forecast was updated with the February forecast. The Chamber put out a statement noting that when Minnesota’s economy grows, the state’s budget outlook improves and creates economic opportunity for all Minnesotans.

This new forecast is important because it serves as a jumping-off point for the legislative session. It shows a $3.7 billion budget surplus, which is an increase from the previous estimate and demonstrates how economic growth strengthens the state’s fiscal position. However, long-term challenges remain. The state is projected to face a $2.3 billion deficit in fiscal years 2028 and 2029. Spending continues to outpace revenue. Annual revenue growth is projected at 1.9%, while baseline spending is growing at 2.9%. That structural imbalance reinforces our message that policies that grow the economy can help close the gap and reduce pressure on taxpayers.

Call it growing the economic pie. If we grow the economy, we won’t need to raise more taxes. The question then becomes: what can we do to grow that economic pie? That’s what is being discussed at the Capitol this year and into the future, especially as we look at the Chamber’s 2026 Business Benchmarks report and our campaign called the Economic Imperative for Growth. If we grow, we can accomplish more through the private sector and ensure a more efficient delivery of public services.

At the Capitol, we’re also closely watching significant movement on tax proposals this week. Lawmakers are advancing efforts to shut down autonomous ride-sharing platforms, a move that could jeopardize future innovation and investment in our state. At the same time, we continue to advocate for policies that promote growth, competitiveness and opportunity for employers across Minnesota.

I mentioned tax provisions earlier, and this relates to taxes that the state has the opportunity to review through the conformity process by conforming to the 2025 federal tax bill. A few provisions are especially worth noting: bonus depreciation and Section 179 expensing, which are both important to small businesses, and research and development expensing as well. This is a unique opportunity for Minnesota to become more competitive. Other states are already reviewing their conformity policies, and Minnesota needs to make sure it is doing the same to remain on a trajectory of economic growth.

Also this week, we hosted our 2026 Workforce Summit, bringing together businesses and education leaders to focus on strengthening Minnesota’s talent pipeline. As part of our Economic Imperative for Growth strategy, building a capable and skilled workforce is front and center.

The discussions focused on labor force and immigration trends, skills-based hiring, workforce retention strategies, and the practical management of apprenticeships, visa systems and workforce grant opportunities. We were joined by outstanding leaders, including Megan Hughes of Bank of America, University of Minnesota President Rebecca Cunningham, University of St. Thomas President Rob Vischer and Minnesota State Chancellor Scott Olson.

Attendees participated in breakout sessions covering topics ranging from manufacturing apprenticeships to immigration enforcement resources. These sessions shared real-world strategies to help employers compete. These conversations will continue because they matter greatly to the future of our state. Building a stronger, more competitive workforce is essential to attracting talent and driving long-term economic growth in Minnesota.

Thank you to everyone who joined us for the Workforce Summit this week. We’ll continue finding ways to share this information and engage at the Capitol. I encourage you to visit our website and check out the events section to find opportunities to engage with us, just like the ones we hosted this week, as we focus our attention on advancing policies that support Minnesota’s economy.

Thanks again for being with us. Please have a great weekend, and we look forward to catching up with you on next week’s episode of the Minnesota Business Podcast.