ST. PAUL (AP) -- There's a better than 50 percent chance that state government will suffer a budget shortfall in the current fiscal year, State Economist Tom Stinson predicts.
The cause is the floundering U.S. economy, which meant Minnesota's good fortunes and fat surpluses couldn't hold out forever.
In addition to new U.S. job losses reported Friday, Stinson said, Minnesota's revenues for July and August declined slightly in virtually every major tax category: individual income, corporate income and sales. Only the motor vehicle sales tax came in ahead of projection, and that is the smallest of the four major taxes, he said.
"There isn't any way to sugarcoat it," Stinson said. "This is just not good news for the U.S. economy, and it's not good news for the Minnesota economy."
Final figures on tax collections for July and August won't be available until early in the coming week, he said. Some minor categories of collections hadn't been fully tallied yet, Stinson said.
The next official state revenue forecast is due in November and will set the stage for budget planning in the 2002 legislative session.
The state hasn't had a projected shortfall since the early 1990s.
A shortfall could trigger budget cuts when legislators return to St. Paul at the end of January.
A key factor in the state's potential budget woes is the optimistic forecast that the budget was based on. Data Resources Inc., the state's national forecaster, in February projected 4 percent growth in real gross domestic product for 2002 -- a degree of optimism that made economists here nervous even then.
Stinson and others have said that because Data Resources' initial projections were so rosy, the state won't have to enter a recession to trigger a budget shortfall. All that would have to happen is for the state's economy to underperform even slightly.
That, Stinson said, is the situation it now appears to be in.
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