Hit with giant deficit, state politicos point fingers

ST. PAUL -- Now that they've got an idea on the size of Minnesota's budget problem, the next step for state leaders is to figure out how to fix it.

Gov. Jesse Ventura, Senate Majority Leader Roger Moe and House Majority Leader Steve Sviggum planned to meet Wednesday afternoon to discuss the $1.95 billion deficit projection announced a day earlier.

It's the first revenue shortfall since 1992. While state leaders had been expecting a deficit, the projection developed by state economists and outside consultants was twice as large as they thought.

Gov. Jesse Ventura said he gasped a little when saw the number, but added it provides an opportunity. "It's difficult to reform when everyone is fat and sassy and you have plenty of money. But you're going to get tough decisions when there's a deficit," Ventura said.

State revenue for fiscal years 2002-03, which began on July 1 and ends on June 30, 2003, is now estimated to be $2.1 billion less than it was in February, when a surplus was projected.

Politicians left $235 million of that surplus unspent last session to buffer against an economic downturn. With that surplus thrown in, the state's projected deficit drops to $1.95 billion.

The state also has $653 million in a rainy day reserve fund. With that money counted, legislators and Ventura will face making up at least $1.3 billion with either cuts in spending, new taxes and revenue or both.

And time is working against them. With six months of the 24-month cycle gone, and as many as six months likely to pass before corrective legislation is enacted, the deficit will have to be reduced in just 12 months.

At a news conference after the deficit projection was announced, Moe said his party lost the budget battle against the Republican-controlled house and the Independent Party governor for smaller tax cuts and bigger reserves.

His harshest criticism was aimed at Ventura.

"We have a governor that for three years has villianized the Legislature. Has accused us of everything you can possibly imagine," said Moe, DFL-Erskine. "Has taken credit for tax cuts, tax reform and tax rebates and now is starting to borrow. I can assure you his arms are going to be wide open asking for help."

Sviggum, R-Kenyon, said he would prefer waiting until after the next revision of the revenue forecast, in late February or March, before making big changes to the state budget. For now, he suggested Ventura impose a hiring freeze on state employees.

He said Ventura's idea to raise money by extending the sales tax to goods and services not currently taxed is "not going to fly in our caucus."

Moe said he favors a hefty bonding package, which funds capital construction projects around the state, saying it would create jobs. "If people are back to work, they're going to be paying taxes and they're going to be buying things," he said.

In developing Tuesday's projection, finance officials said the state's big drop has been in corporate income taxes, which came in 28 percent, or $470 million, under projections from earlier this year. Individual income tax receipts were down 6.7 percent, or $873 million. Sales tax receipts were down 10 percent, or $829 million.

Motor vehicle receipts were one of the few bright areas, up 6.6 percent, or $41 million, reflecting the broad strength of new-car sales.

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Ashley H. Grant may be reached at agrant(at)ap.org.

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On the Net:

Minnesota Department of Finance: www.finance.state.mn.us