Minnesota’s projected biennial budget deficit swelled to nearly $6.2 billion in the latest economic forecast, state budget officials announced.
The shortfall, outlined in the November Economic Forecast, would account for nearly 16 percent of projected General Fund spending in the state’s upcoming two-year budget cycle. The figure is nearly $594 million higher than the $5.6 billion deficit predicted in May.
“I think it’s very fair to say that there’s a very significant amount of unfinished business in Minnesota,” said Minnesota Management and Budget Commissioner Steve Sviggum.
The forecast cites the expiration of federal stimulus programs, the cost of repaying one-time accounting shifts, and an overall weakened economic outlook as among the contributing factors to the widening budget gap.
The news is not all bad. For the current budget cycle, which ends June 30, 2011, the forecast predicts a $399 million surplus. A boost in federal health care funding and lower-than-expected state spending obligations account for the positive cash balance.
“We have a little bit of breathing room now in the current biennium,” said MMB Deputy Commissioner Jim Schowalter.
Although revenues are expected to grow by $1.5 billion in the next biennium, General Fund spending is scheduled to rise by $8.3 billion. Only $2 billion of the increase is due to actual program growth, however; the rest is due to the loss of federal stimulus funds and one-time budget solutions.
In reacting to the forecast, House and Senate DFL leaders laid the blame for the deficit squarely at the feet of Gov. Tim Pawlenty, who they said favored one-time budget fixes over long-term, structural solutions. They noted that Pawlenty vetoed numerous tax bills that would have boosted revenue.
House Minority Leader-elect Rep. Paul Thissen (DFL-Mpls) called the forecast, “Tim Pawlenty’s legacy for Minnesota.”
Republican leaders, meanwhile, said the budget deficit called for a fundamental redesign of state government services. They pledged to focus on funding only priorities like schools and nursing homes.
House Speaker-designate Rep. Kurt Zellers (R-Maple Grove) said the new House and Senate Republican majorities would not support “job-killing tax increases” favored by DFLers. He said the state needs to learn to “live within its means.”
Pawlenty defended his record on the budget, arguing that state spending needed to be curbed, and said the $6.2 billion deficit is “fictional” because it assumes state spending should automatically increase. He also blamed DFL lawmakers for not ratifying his 2009 budget unallotments.
Pawlenty emphasized the $399 million surplus in the current biennium, calling it “very good news” for the state.