State faces projected $6.2 bil. budget deficit

While predictions for the next budget biennium are $600 million lower than anticipated, Minnesota will end this year with an unexpected $399 million surplus.

by James Nord

MinnesotaâÄôs deficit for the next budget biennium is $6.2 billion, according to projections released Thursday by state officials âÄî roughly $600 million worse than previously estimated.

The state budget, buoyed this biennium by federal stimulus dollars and one-time payment shifts, is âÄústructurally unsound.âÄù There are few other âÄúsmoke and mirrorsâÄù and single-use tactics left for Minnesota, state economist Tom Stinson said.

âÄúWeâÄôve pretty well played all the cards that weâÄôve had,âÄù he said.

Spending is projected to jump 27.5 percent next biennium, despite a state revenue increase of only 5 percent.

The huge spending increase next budget cycle stems from largely one-time measures used to tamp down state expenditures over the past two years.

These include $3.1 billion in stimulus dollars, $1.9 billion in K-12 education funding shifts and $660 in one-time reductions in higher education and local aid. Such extraordinary measures probably wonâÄôt be available to lawmakers in the near future.

The state projects that it will end this year unexpectedly flush with cash after a special legislative session in October drew in federal health care dollars.

The unanticipated $399 million surplus means the state wonâÄôt need to use short-term borrowing to maintain services in December, which some legislators previously thought likely.

But until the entire budget structure is fixed, deficits will continue past 2015, according to state projections.

StinsonâÄôs solution: âÄúBuy taxable items when you go Christmas shopping.âÄù

At a press conference after the budget forecast was released, Republican legislative leadership said the deficit is the product of excessive government spending. The answer to solving the heightened shortfall is spending cuts and creating a friendly business environment, Senate Majority Leader Amy Koch, said.

But the DFL minority said both tax increases and program cuts will be necessary to solve the deficit.