- Governor Walz Withdraws: On January 5, 2026, Governor Tim Walz announced he will not seek a third term. He cited the "extraordinarily difficult year" and his inability to campaign while managing the state's response to widespread fraud.
- Fraud Scandal: Federal investigators have uncovered "industrial-scale fraud" in state-run social services, including Medicaid and childcare programs, with potential losses reaching into the billions of dollars. Over 90 people have been indicted so far.
- Federal Pressure: House Oversight Committee Chairman James Comer has demanded Walz appear for a public hearing on February 10, 2026, to answer for the scandal.
Economic & Budgetary Challenges
- Impending Deficits: While the state currently holds a $2.5 billion surplus through June 2027, fiscal analysts forecast a $3 billion shortfall shortly thereafter.
- Rising Costs: Spending on health and human services is accelerating while revenue growth is slowing. The 2028-29 biennium is projected to have a structural imbalance of roughly $4.5 billion to $6 billion.
- Healthcare Inflation: Skyrocketing health insurance costs are impacting both family budgets and the state's bottom line.
Federal & Social Tension
- Federal Crackdown: Following the fraud allegations, the Trump administration has surged federal agents (ICE and Border Patrol) to Minnesota, specifically targeting the Somali community in Minneapolis.
- Assassination Impact: The political landscape was further destabilized by the assassination of House Speaker Melissa Hortman and her husband in June 2025, which authorities described as "politically motivated".
Recent State Actions
- New Laws: Several major laws took effect on January 1, 2026, including the official launch of Minnesota's Paid Family and Medical Leave program and new requirements for employee rest and meal breaks.
- Minimum Wage: The state's minimum wage increased to $11.41 an hour on January 1.
What led to Tim Walz not running for reelection?
What are Minnesota's political parties' responses to the budget deficit forecast?
Tell me more about the fraud scandal in Minnesota
13 sites
- Latest budget forecast projects nearly $2.5 billion surplus, but red ink ...
Dec 3, 2025 — Officials said there was a nearly $5 billion surplus heading into the current biennium that began July 1, 2025, of whic...
Minnesota House of Representatives (.gov)
- Governor Walz Statement Announcing He Will Not ... - MN.gov
Jan 4, 2026 — Governor Walz Statement Announcing He Will Not Seek Reelection. January 5, 2026. [ST. PAUL, MN] – Governor Tim Walz tod...
mn.gov
- Who's to blame for Minnesota's budget imbalance? - MinnPost
Dec 8, 2025 — Minnesota State Capitol building Credit: MinnPost photo by Peter Callaghan. Minnesota's latest economic outlook forecas...
