We’re off and running…
11:16: Tom Hanson, commissioner of finance, says $935 million deficit is projected for the next two years. About a half-billion worse than was forecast in November. Reveals a recession is expected in the first two quarters of this year and be short. Corporate revenues have dropped 20 percent from a year ago. Individual income taxes have dropped, too. A $1.1 billion deficit is projected for 2010-2011. Worse with inflation (what? Budget folks for Minnesota are acknowledging there’s such a thing as inflation, now?)
11:19: State economist Tom Stinson says it’s wrong to focus on the change between November and now. Says it’s “misleading.” Wants to focus on total change from end of session estimates and current estimates. That end-of-session change has the income tax down 1.8 percent (20% of revenues), sales tax is down 3.4% (25% of change in revenues). Corporate income tax down 21% (a third of the change). Other taxes down 3.2%. “A widely dispersed reduction. It’s not just a one-tax problem, it’s a problem with the economy.”
11:23 – Stinson: Income tax’s reduced receipts are from “non-wage sources” like capital gains, interest, and dividends. In other words, businesses aren’t being sold, for example.
11:26: Corporate refunds are “much higher” than expected over the last 6-8 weeks.”That’s money that’s out the door.” (bob: what will corporations do with the refunds?)
11:27: Stinson expects higher sales tax receipts because of rebate checks.
11:27:30: DING DING DING. “We’re in a recession,” Stinson said. Over to you, governor. Stinson says since stimulus package runs out at the end of the year, we could have a “double dip” recession. What does that mean?
11:30: Stinson’s tone now is very much like the funeral home person who helps pick out a casket.
11:33: Time for questions from the reporters (which nobody can hear). Hanson doing the talking. “Certainly doable,” Hanson says in ability to fix things this year.
11:34: Legislative TV coverage shifts to Senate debate of Molnau’s future. Turning off TV sound.
11:36: Hanson says other states are in deep doodoo, too. “Even states like Texas that have oil revenue,” he says.
11:37 – Gas tax won’t make any difference. “It’s outside of the current biennium,” Stinson says.
11:37 – Unidentified presenter. “It all depend on whether the economy goes into recession or not.” Wait a minute! I thought they just said we are in one?
11:41 – The Minnesota Department of Finance has just made all the charts and reports available online. Go here.
11:42: “This is troubling because the uncertainty isn’t going to be resolved very quickly,” Stinson. Warning: The forecast assumes the price of oil drops to $75 a barrel this summer. Likely?
11:45: The stimulus package from Washington “will almost certainly stop” a recession after the second quarter. Is that the recession we don’t know we’re in? Or the one we do?
11:48: The $75 a barrel projection for oil assumes there’s a recession and we drive less.
11:49: Loss of any jobs in the Delta-NWA merger would affect the forecast. “Not to minimize the problems of the individuals, but with 2.7 million jobs in the state, this isn’t something that will bring the economy to its knees” Stinson said.
11:50: Two areas of strength in the national economy — energy exploration and defense industry — aren’t Minnesota’s strong suit. Not so in North Dakota. Timber industry is Minnesota’s ace.
11:54 State not laying people off. Hiring “freeze” means a “slowdown” in replacing employees who leave.
11:55: Current budget reserve is about $653 million. “We also have $350 million cash flow account. That’s an appropriation.” Yahtzee… that’s $1 billion! “It would be wise to keep some money on hand in case our November and (next) February forecast goes down,” Hanson said. Oh.
11:58: Hanson says Stinson would “have his economist card pulled away if you called him optimistic.”
End of news conference. Back later with the governor’s response.