$1.2 billion red

A report from the state budget department says the state is deep in red ink for the 2010-2011 budget cycle. The report says 70 percent of the 1.2 billion dollar deficit is due to lower than expected income tax receipts. The document also said the budget problem will grow even larger in the future with a projected budget deficit of $5.4 billion in the 2012-2013 budget.

The forecast means Governor Pawlenty and DFL lawmakers will have to cut spending or increase revenue to balance the state’s budget. In July, Pawlenty unilaterally cut $2.7 billion in spending after he couldn’t reach a budget deal with the Legislature. Lawmakers begin the 2010 session on February 4th.

Update: Here’s the budget document and the link to other documents.

  • Chris

    Thoughts on the forecast:

    *Long-term, the first few pages seem to make the point that Minnesota doesn’t have a “spending problem” or a “revenue problem,” but a jobs and wages problem.

    *Short-term, I had to scroll down to the next-to-last page to find the answers to my two main questions: What’s the discrepancy when inflation is factored into the forecast? (About $1.2 billion extra in the ’12-’13 biennium, which would bump it from $5.4 billion to $6.6 billion.); and what’s the cost of restoring the GAMC cuts? (About $928 million extra to the immediate deficit, assuming all the cuts are restored.)

    Thoughts on the politics:

    *Short-term, Speaker Kelliher might be re-thinking her decision to stay on in leadership while seeking the gubernatorial endorsement right about now. Restoring the GAMC cuts (one of the big priorities of DFL activists, which she’s been hinting she can deliver on) increases the size of the deficit by 75%. Meanwhile, Pawlenty isn’t going to sign any tax increases while running for President and GOP legislators aren’t going to override any vetoes while seeking re-endorsement from their own activists. So where the hell does the money come from given the political realities of the moment?

    *Longer-term, if a DFLer becomes Governor in 2011, whoever s/he is will have to reconcile re-factoring inflation into budget forecasts with the increased spending/investment priorities they’ve been outlining on the campaign trail. Both have been more or less the official DFL positions for the last seven years, but doing one makes the other harder. It’s a contradiction they’ve been glossing over for a while, and I’d be interested to hear that question asked at a candidates’ forum. At the ones I’ve listened to so far, it hasn’t been.

    *We’ll have to wait and see Pawlenty’s budget proposals, but my guess is he’ll maintain his “no new taxes/no cuts to education” line with his eye on 2012, propose a mix of cuts and smoke and mirrors, and that the GOP legislators running for Governor will operate basically within this framework while proposing a few grandstanding amendments to eliminate some departments here and there. I’ve outlined the difficulties for Kelliher above. If Pawlenty takes a big whack at LGA, that could force Rybak (who Pawlenty seems to have a special distaste for) into some awkward budget choices of his own. Bakk, Rukavina, and Thissen all chair committees that have some involvement in setting budget priorities, so they’ll have the chance to show their methods of trying to deliver for their particular stakeholder groups.