Good morning. A welcome double gold-medal honor hits the Saturday Night Live stage. 

The weekend U.S. strike on Iran underscores just how much the issue set can and will change between now and November. It’s too early to say how the situation in the Middle East will play out. The early headline is that much of the country’s hardline leadership has been decapitated . It leaves Iran at a crossroads and the U.S. role there open to debate. Republicans largely celebrated the result of the strikes. House GOP Majority Whip Tom Emmer of Minnesota called it  “a bold, decisive act of strength by President Trump. The Ayatollah is responsible for killing hundreds of U.S. service members and slaughtering its own people. We pray that because of this leadership, the U.S. and the world will be a safer place.” Many Democrats are demanding that there be a war powers vote in Congress. “Make no mistake, President Trump has unilaterally taken our nation to war. This military action was launched without Congressional approval and with no imminent threat posed by Iran to the United States,” said Democratic Rep. Betty McCollum of Minnesota. With the GOP in charge of both chambers, a vote might not happen if the White House doesn’t want to put members on record. U.S. casualties or boots on the ground could shift public opinion. The Trump voters who wanted less entanglement on the global stage are important to watch here, too.

Minnesota’s new budget forecast opens up a world of options for state lawmakers. Vast improvement in the short-term picture could boost the prospects for ideas with a one-time cost. Think road projects, technology upgrades, new housing initiatives or maybe rental assistance. There will be added pressure on lawmakers to go bigger though on tax cuts or start plugging anticipated gaps in health care given federal actions of late. Peter Cox sets the table on the session from here forward after the forecast showed a $3.7 billion projected surplus in this budget and erased predictions of red ink in the next one. None of it will come easy with the continuing political split, but there’s more room for all sides to walk away with wins.

Forecasts are more than the topline figures, but officials warn that recent federal policies and the impact of immigration actions in Minnesota could upend things in a blink. The effects of recent federal immigration policies, changing tariffs and rescinded federal funds are not reflected in the February budget forecast , but they could dramatically affect the budget’s trajectory in the future. Erin Campbell, Minnesota Management and Budget commissioner, said, “The reality is that it wouldn't take much” to make the positive balance forecasted “end up being a negative number in the next few months." Campbell said though it’s too early to tell exactly how recent federal actions will affect the forecast, it probably won’t be favorable.

Special education is driving higher forecasted spending for public education. E-12 education (the “E” is for early childhood education, before kindergarten) is forecasted to be $111 million, or 0.4 percent, higher than the November forecast. The MMB report says that’s more than offset by forecasted savings from health and human services in the state. “Today's increases are because we now have complete data about what schools spent on special ed services in the 2024-25 school year,” State Budget Director Ahna Minge said. Minge said special education spending continues to grow each year. Something to watch: year-over-year student enrollment was up recently but is forecast to fall after fiscal year 2025. The forecast shows some savings in the human services area due to new prepayment review and billing procedures that are expected to reduce costs by $133 million compared to the prior estimates.

The budget report was prepared without some key federal data. The federal government shutdown in November and the partial shutdown in February means certain economic reports are late and couldn’t be incorporated into the state budget forecast. Minnesota State Economist Anthony Becker said the missing data includes fourth quarter gross domestic product, corporate profits and the January 2026 Employment Situation Summary report. When it comes to tariffs, the economic prognosticators are banking on the retraction of some of President Donald Trump’s tariffs to be more to the good than the bad — with qualifications. “On balance, we believe that the reduction in tariffs will have generally positive effects on the national and state economic outlooks, though the timing and magnitude of these effects are uncertain,” the report reads.

Last year was a big year for data centers nationally — a hot and continuing topic in Minnesota. The report says an almost 70 percent increase in investment in computers in 2025 reflects an increase in data centers, which have become increasingly controversial in Minnesota. That’s only counting activity in the first three quarters. Equipment expenses are a big part of it and those are happening despite tariffs on imported goods.

 

Immigration policy on top of an aging population could hurt Minnesota’s job growth. “Without sustained worker inflows either from international immigration or domestic migration, Minnesota employers may struggle to fill jobs,” the report says. That could slow overall economic growth in the coming years. Watch the agriculture sector, too. Farms rely on migrant labor so there are vulnerabilities in manpower in addition to continuing concern over lower commodity prices and tariff pressures. Farm sector profitability “has weakened significantly since 2022” and median farm income is at its lowest level this century, the report says.

Consumer spending and habits are also an important metric to stay on top of. Inflation is expected to continue to moderate, which would make personal expenses go further. But lingering effects of past consumer spending show strain. Delinquency rates on credit card and auto loans are at their highest percentages since early 2011. The incidence of seriously delinquent payments — those more than 90 days past due — are at 12.7 percent for credit cards and 5.2 percent for auto loans. Both are higher now than during COVID-19 even. “Student loan delinquencies have been up sharply over the past 18 months as COVID-era payment pauses, loan forbearance, and targeted relief programs expired,” the report says. “In contrast, the rates of mortgage and home-equity loan delinquencies are both below one percent.”