[ST. PAUL, MN] – Governor Tim Walz today released his 2026 supplemental budget proposal at the Eastside YMCA. The budget prioritizes lowering costs for middle class families, helping Minnesotans through workforce disruptions caused by artificial intelligence, and responding to Operation Metro Surge, while making responsible cuts to continue Minnesota's record of balanced budgets. The Governor’s full supplemental budget proposal is available online .

“As families see higher prices and more economic uncertainty, we’re proposing legislation to make everything from child care, to housing, to property taxes more affordable for middle class families,” said Governor Walz. “This is a fiscally responsible plan that cuts spending to maintain a balanced budget while preparing our economy and our workforce for the challenges of artificial intelligence.”

The Governor’s supplemental budget would cut $370 million in state spending in Fiscal Year 2029 and reduces the structural deficit by nearly 20%. By slowing the rate of growth in programs that for years have been key drivers of increased spending and minimizing the impacts on eligibility and service levels, the Governor’s budget would leave a projected balance of $1.8 billion on the bottom line in FY 28-29.

Lowering Costs for Families
The Governor’s proposed budget would offset rising child care costs by providing families with child care refunds. Expanding the Dependent Care Tax Credit would benefit 104,800 families with young and school aged children and increase the maximum allowable expenses by $3,000  for one child and $6,000 for two or more children under five years old. The budget also includes $33 million for permanent supportive housing, $34 million for first-time homebuyer downpayment assistance, and a cut to the statewide sales tax by .075%, which would be the first sales tax cut in state history.

Supporting Workers Impacted by Artificial Intelligence and Making Tech Companies Pay Their Fair Share
Artificial intelligence (AI) is rapidly transforming industries, business practices, and jobs. As tech companies see record profits while workers bear the costs, the Governor is proposing proactive steps to ensure workers and businesses are prepared to compete and succeed in the changing economic landscape. The Governor is proposing a social media tax on tech companies with over 100,000 monthly users. The revenue would be dedicated to workforce and economic development initiatives designed to prepare Minnesota’s workforce and businesses for increased AI adoption and other emerging technologies. He is also proposing a new Governor’s Council on the Future AI Economy that would help provide guidance on how funds should be invested to ensure Minnesota remains a leader in innovation while ensuring Minnesotans benefit from technological change.

Operation Metro Surge Response
Operation Metro Surge had significant financial and societal impacts on Minnesota families, children, schools, businesses, and the economy. The Governor’s supplemental budget prioritizes resources to help Minnesota recover, with $10 million in partially forgivable loans for businesses that faced significant revenue loss; a $10 million investment in the Human Services Response fund at the Department of Human Services to help support the health and wellbeing of Minnesotans; and rental support for 9,150 Minnesota renters through the Family Homelessness Prevention and Assistance Program.

Gun Violence Prevention, Safety, and Security
Gun violence has inflicted immense heartbreak and loss in Minnesota. The Governor’s budget would build on previous gun violence prevention measures taken in Minnesota with proposals to ban military-style assault rifles and high-capacity magazines; ensure accountability among responsible gun owners by requiring safe storage and reporting of lost or stolen firearms; close the ghost gun loophole; implement a firearm insurance requirement; establish a firearm and ammunition tax; and create and expand early intervention resources, including school resources. The supplemental budget also includes increased penalties for impersonating a police officer and funding for Capitol security enhancements.

Fraud Prevention and Financial Integrity
Governor Walz and state leaders have taken extensive action to protect taxpayer dollars and strengthen program integrity across state government. The supplemental budget builds on these actions with increased detection and oversight, strengthened investigative and enforcement authority, and increased criminal penalties. The budget also establishes a Statewide Office of Inspector General; prohibits legislatively named grants; adds capacity for fraud prevention at the Attorney General’s Medicaid Fraud Unit; strengthens program integrity at Managed Care Organizations; and allocates $30M over three years to update Minnesota’s legacy IT systems.

The Governor also plans to work with the legislature this session to find a path forward to preserve Hennepin Healthcare’s Hennepin County Medical Center (HCMC), an important statewide asset. He has tapped former Minnesota Department of Health Commissioner Jan Malcolm to work directly with hospital and health system leaders across the state to address financial challenges facing providers, strengthen coordination between the state and hospital systems, and develop recommendations.