Minnesota’s legislators will be looking down the fiscal barrel of an anticipated $1.1 billion budget deficit before they are even sworn into office.
Having regained control of the Minnesota House and Senate, Democrats received word Wednesday, Dec. 5 from Gov. Mark Dayton that the state collected enough revenue to pay state school districts $1.3 billion of the $2.4 billion borrowed by the last legislative term. That’s the good news. The bad news is that the state will still face a $1.1 billion shortfall, according to Gov. Dayton.
Minnesota is one of several states that forces the state Legislature to balance its budget. Accomplishing that for 2014-15 may be impacted by the nation’s fiscal battle. Tom Stinson, a state economist suggested that if the nation goes over the fiscal cliff, it would require tax hikes on the national and state levels, along with cuts in programs currently funded by the federal and state governments. Stinson predicted that it could mean that around 130,000 fewer jobs could be created in the next two years, which would see the state unemployment rate jump to 7.1 percent.
Stinson predicted another recession in Minnesota and throughout the nation, with possible ramifications on the world’s economic future.
On the brighter side, the state’s financial outlook for the remainder of the current two year cycle has improved significantly. State income, sales and corporate tax collections have checked in at $810 million higher than officials had projected. And spending on programs such as health and human services checked in some $262 million lower than anticipated.
Minnesota’s macro-economic consultants, Global Insight Inc., is forecasting the national economy to grow at a rate of 1.9 percent for 2013, 2.8 percent for 2014 and 3.3 percent growth is anticipated for 2015. Global noted that the growth rates are lower than predicted in February.
So, what are the prognosticators seeing for Minnesota’s economy? They are predicting $35.8 billion in revenues, but the state is anticipating expenditures of $36.9 billion. In addition, state money crunchers are projecting an additional $1 billion more for inflation. That boils down to a $2.1 billion shortfall that the governor and the Democratic Farmer Labor controlled Minnesota Legislature will have to fill. That’s a tall order.