February Economic Forecast Released — Deficit Increasing
State economists released an updated state budget forecast on Tuesday, March 3rd. The total state budget deficit has grown by more than 25% since the last forecast was released in November, totaling $6.4 billion for the next two-year budget cycle, 2010-2011. The amount of revenue the state expects to take in will drop to $30.7 billion in the next biennium. A portion of the federal stimulus funds recently approved by Congress will be available to help solve the deficit, which brings the remaining shortfall to $4.6 billion. A good deal of the federal stimulus spending is dedicated to specific purposes, however, so much of the federal stimulus money coming to Minnesota will not be available to plug the general fund deficit.
According to the Department of MN Management & Budget, “a longer and deeper recession is now forecast.” Real GDP is expected to fall by 2.7% in 2009, although the federal stimulus package is expected to help lift the economy by early fall. About 20% of federal stimulus dollars will be spent by October 2009, and it is anticipated that this spending will help shorten the recession. The rest of the federal stimulus spending will occur in 2010 or 2011. Job growth in Minnesota is not expected to pick up until early 2010. Unlike prior recessions, Minnesota is being hit harder in the recession than other states and is expected to take longer to recover than it did in the past.
The federal stimulus dollars are helpful, but they are not a long-term solution to the troubles facing Minnesota’s state budget. The economic forecast revealed that Minnesota has a structural deficit in the “out years” of 2012-2013 of over $5 billion, not including inflation. If you factor in inflation for the 2012-2013 budget, we will be looking at a deficit of $6.4 billion. The federal stimulus package is one-time money to help bridge us through the recession, but there are still tough decisions that need to be made.
To read the full forecast, follow this link to the MN Management & Budget website: http://www.finance.state.mn.us/forecast
mendota heights
March 23rd, 2009 at 1:01 pm
Before we all accept reduced services and increased property taxes and “fees” I think all Minnesotans should read and understand the 2009 Minnesota Tax Incidence Study. This Study clearly shows that Minnesota’s tax system has become more regressive by shifting income taxes to property taxes and “fees” and it clearly favors the top income earners who pay a much lower percent in Minnesota tax compared to middle and lower income earners.
Before we agree to balance the budget only with cuts to services, rising property taxes, increased fees, and wages freezes we should ALL demand fairness in the tax code! Every one of us should be hounding our legislators with the results of this study put out by the State and demand changes and tax equity.
http://www.taxes.state.mn.us/legal_policy/other_supporting_content/2009_tax_incidence_study_links.pdf
Saint Paul
March 28th, 2009 at 9:34 am
Make income taxes fair, which means to ensure that the wealthy pay at least the same percentage as I do. They should actually pay a higher percentage of their income than I do.
My property taxes have gone up from $1,200/year in 2002 to $2,000 this year. That’s a 66% increase in 7 years. I blame republican federal and state income tax cuts almost exclusively for this insane increase because of the subsequent reduction in aid to states, counties, and cities.
Bemidji
April 3rd, 2009 at 8:09 pm
I think we should take a long hard look at our income tax system. Issuing tax refunds to individuals that exceed (sometimes significantly) what was paid in by the individual does not make sense to me especially during these times when our federal as well as our state government cannot meet existing obligations. Our tax dollars already fund the services and programs designed to assist those in need. Using tax dollars to provide this “additional income” to people sends a negative message to those actually paying the taxes.
I am a firm believer in the tax payer funded programs that provide food, shelter and basic health care to those in need. I feel that programs that provide “non-essential” services such as daily public (subsidized) transportation should be looked at to see if there are opportunites to “streamline” such as operating 1 or 2 days a week.
Fergus Falls
April 4th, 2009 at 8:30 pm
It would seem to me that budget problems for Minnesota have always come when the “forcasts” are over stated. This is not the first time we have seen this situation. We always get into problems when there seems to be a surplus of funds and we go on spending spree. Most of our problems are that we fund every little pet project that comes along when we have plenty of money or when the “forecasts” tell us that we have plenty of money. If we look at the budget for Minnesota, we spend way to much money for our population base. What 5.5 million? Maybe we’re not very responsible spenders. It’s seem rather obvious that we are not very responsible forecasters. We have to many fingers in the pie. The solution is to stop spending more than comes to the treasury. If we were to change tax policy I would be in favor a flat tax. There is nothing regressive or progressive about that approach. That would make it simple. We could just send in a post card with our check due. We could be rid of tax lawyers, accountants, and alot of state jobs that could do something more productive. It would also take the burden off all the employers in the state. I don’t think this forum offers enough space to really lay out the flat tax idea but it could be done, I believe, very easily. Thanks
Shakopee
April 9th, 2009 at 7:36 am
Face it, raising taxes will not fix the budget, but at this point we will have to as a part of the solution. We are already one of the highest taxed states in the country as it is. Cutting cost is only part of the answer also. We’ve cut several times over the last few sessions, and we need to cut again, But there has to be cuts besides education, and law enforcement to be made. Both are painful options to consider, i know it you know it! I say we get creative! We need to look at EVERY option for raising funds. For years the opinion polls have shown the the vast majority of Minnesotans want Racinos. It will not fix the deficit, but it will provide hundereds of millions of dollars to put towards education, and other underfunded community services. It will provide thousands of jobs, with good pay and health benefits. How about the additional benefits to the local and state economy? maybe it can help get these forclosed homes in the area sold and occupied? the benefits are many and must be considered fairly. face it there has been NO other option put forth this session or any other session in recent memory that can provide the economic benefits without raising taxes.
St. Paul
April 28th, 2009 at 12:49 pm
I am a fan of a flat tax as well, perhaps even a consumption tax. I am a little tired of the “making taxes fair” arguments. Depending on the year, I could be rich or I could be poor (small business). How does one determine the “fair” amount of taxes that I should pay when my income fluctuates that much? What I AM in favor of is some rational spending by our legislators. Before we buy into the fear tactic that all the key services will have to be cut back and people will starve, let us do what one of the previous commenters said and look hard at where the dollars are going. I attended the Senate Agriculture committee meeting a few weeks ago where Senator Muoa proposed that tax dollars be used to reimburse large garden growers (farmers market folks)for the loss in production due to hail storms last year. She even wants us to help cover the cost of their land leases. While I am a huge fan of the farmer’s markets, I believe that that’s why we have insurance. AND, it is not their livelihood. So WHY during times of billion dollar deficits, where funding for the essentials (police, fire, schools…) is tight are our legislators trying to allocate scarce dollars to non-essentials? I will tell you why. To get their votes. This is only one small example of the many unthinking and irresponsible requests I have heard from our legislators this last session. If we really want to get into big dollars, just take a look at what the Minnesota Department of Health is spending to create a DNA warehouse and Universal Health Care system. Millions. All of it documented. Most of which has occurred behind closed doors and has only now come to light. The conclusion: legislators and the government agencies that are created by them need to remember who’s money they are spending and who they work for. The tax payer.
Moorhead
May 18th, 2009 at 10:26 am
My dad, almost 86, had observed it’s difficult to keep the budget at a MINIMUM, because we ARE a UNION state, thus making Education, Road Construction, and UNION CONTRACT Companies, MORE EXPENSIVE, generally. He noted that Honda & Toyta, Japanese companies, can operate cheaper, because they are NOT caught in UNION state agreements. Another items costing taxpayers are funding abortions, funding expenses of refugee cities, and WE could SAVE a lot of MONEY IF ENGLISH was our universal GOVERNMENT LANGUAGE!