Tough economic times could mean more tough decisions for state leaders – and soon.
A forecast released by Minnesota Management and Budget indicates the state faces a projected $1.2 billion deficit in the 2010-11 biennium, and potentially a $5.43 billion shortfall in the 2012-13 biennium.
“This is a significant deficit and we will be challenged to solve it together,” said Finance Commissioner Tom Hanson. (Watch)
Senate Majority Leader Larry Pogemiller (DFL-Mpls) said cuts will need to come from everywhere, including areas he has previously opposed and some of the governor’s “pet projects.” (Watch the DFL press conference.)
Approximately 70 percent of the shortfall is due to lower-than-projected income tax receipts. According to MMB, state wages make up about 75 percent of the state’s income tax base; however, wages are on track to decline by 5.5 percent in 2009 compared to 2008.
Members from both sides of the aisle said an answer to exit the deficit is job creation, but they differ on how. “There are no silver bullets,” said House Majority Leader Tony Sertich (DFL-Chisholm).
Pogemiller indicated new leadership might also be needed on the jobs and economic development front, but he wouldn’t directly say the Senate would fail to confirm Dan McElroy as Department of Employment and Economic Development commissioner. However, House Speaker Margaret Anderson Kelliher (DFL-Mpls) said Pawlenty has done well when he must replace a commissioner that fails to get Senate confirmation, such as in the transportation and health departments.
Kelliher and Pogemiller said passage of a capital investment law early in the upcoming session would put more people back to work.
Republicans reiterated their argument that business taxes need to be lowered to create jobs. “Raising taxes would kill the economy,” said House Minority Leader Kurt Zellers (R-Maple Grove). (Watch the Republican press conference.)
Legislators spent much of the 2009 session looking to solve a projected $4.6 billion deficit for the current biennium, which began July 1 and ends June 30, 2011. After legislative leaders and the governor failed to reach a complete budget-balancing agreement last spring, Gov. Tim Pawlenty used his unallotment authority to resolve the final $3 billion shortfall.
By law, the current budget deficit does not have to be resolved until conclusion of the biennium. However, each day that goes by without a resolution decreases the options available as state money is spent. Hanson said 22 percent of the biennial budget has been spent, and Pawlenty added that it costs $40 million-$50 million in General Fund spending each day to operate government.
Pawlenty, who said he has informally visited with legislators, is requesting legislative leaders to begin committee hearings so that reductions could promptly be passed when members reconvene Feb. 4. (Watch his press conference.)
Rep. Lyndon Carlson, Sr. (DFL-Crystal), chair of the House Finance Committee, said he has requested division chairs to see where budgetary adjustments can be made both short- and long-term.
Pawlenty indicated it might be necessary to unallot a portion of Local Government Aid set to go out at the end of this month. A final decision is expected “in the coming days and weeks.”
“We need to consider all of the options available,” Sertich said in a prepared statement. “While legislators often disagree about the best way to erase deficits, we will begin where we agree, by making more cuts.”