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Gov. Walz Releases Supplemental Budget Proposal
Key components include spending increases this year, tax increases, and expenditure reductions in the future.
On March 17, Gov. Tim Walz released his supplemental budget proposal. It includes a net increase of $63 million in general funding spending for the current budget cycle, along with ongoing tax increases and spending reductions.
This is Gov. Walz’s final budget proposal as Minnesota’s governor. He announced in January that he will not seek a third term.
View the governor’s 2026 supplemental budget proposal (pdf).
What’s in Walz’s supplemental budget
The proposal follows the February state budget and economic forecast from Minnesota Management and Budget. That forecast projected a one-time $3.7 billion surplus, alongside a structural deficit of more than $2.3 billion. Inflationary pressures are expected to approach $1 billion.
If lawmakers approve no new spending this year, the state would carry a balance of about $377 million in the next budget cycle.
Against that backdrop, Gov. Walz proposes:
- $57 million for debt service tied to a $907 million bonding bill.
- $56 million on new supplemental budget spending.
- $50 million in additional revenue through tax increases.
Together, the plan results in a net increase of $63 million in spending this year. It also includes significant cuts to projected spending for Department of Human Services and Department of Education programs in fiscal years 2028-2029.
The proposal does not change local government aid or other city programs.
Key tax provisions include a proposed tax on social media and a reduction in the state sales tax rate from 6.5% to 6.425%. The plan also expands the sales tax base to include certain professional services, such as legal and accounting services, resulting in a net increase in sales tax revenue.
What’s next
Lawmakers approved a two-year state budget during a one-day special session in 2025, so they are not required to pass a supplemental budget this year to avoid a state government shutdown.
House and Senate Republicans have said they will not consider any tax increases this year. With the House of Representatives evenly split, Gov. Walz’s tax proposals face long odds.
March 27 marks the first and second committee deadlines. After that, House and Senate committees will begin assembling their omnibus bills ahead of the third committee deadline on April 17. By that date, committees must pass their omnibus bills to the House Ways and Means Committee or Senate Finance Committee. The Legislature must adjourn the 2026 session by May 18.
The League of Minnesota Cities intergovernmental relations team will track the supplemental budget process and provide updates on the League website and in the Cities Bulletin e-newsletter as the session continues.