ST. PAUL- The alleged $50 billion Ponzi scheme perpetrated by Bernard Madoff will reach into Minnesota's already ailing budget, a top official said Friday.
State economist Tom Stinson said a budget forecast due in early March will include an estimate - perhaps $20 million to $30 million - of Madoff-related hits to state tax collections.
The state already faces a deficit projected at $4.8 billion and expected to grow. Nearly 400 entries from Minnesota appeared on a list of Madoff's clients released Thursday, including the Mayo Foundation, Minneapolis attorney Sidney Kaplan and Star Tribune columnist Sid Hartman.
Investors who lost money can deduct their losses on state income taxes under a provision that addresses theft and natural disasters.
"This is the same thing as a tornado destroying your investments," Stinson said.
No one knows how much Minnesota investors lost in Madoff investments. Stinson said one estimate he heard put the figure at $300 million or more, and at that level the state would lose $20 million to $30 million in tax revenue.
The state will lose in several ways. Bilked investors whose incomes were reduced will owe less in income taxes for 2008. They can also file for refunds of taxes paid in earlier years on earnings that never materialized. And those with the biggest losses can spread the losses into future years, Stinson said.
Another fraud case - the alleged $3 billion scheme linked to Twin Cities businessman Tom Petters - is also on Stinson's radar. The economist said the Petters case could hurt Minnesota incomes more than Madoff.
"All of this will kind of be bundled in together," Stinson said of the upcoming forecast. "I don't think there's ever a good time to have people commit fraud with billions of dollars."
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