The Free Press, Mankato, MN

State, national news

February 28, 2013

State budget deficit shrinks by 40 percent

ST. PAUL — Minnesota finance officials said Thursday that the state’s projected budget deficit has shrunk by more than 40 percent, leaving legislators with a more manageable, but still large, $627 million hole to fill over the next couple of months.

The updated economic forecast released by the Department of Minnesota Management and Budget sets the tone for a legislative debate over a two-year budget that starts July 1 and runs through June 2015.

The last forecast, released in December, showed a $1.1 billion deficit, and that’s what Gov. Mark Dayton relied upon to build his budget. He will release a supplemental budget in March to account for the changed projection.

The better news could prompt Dayton to scale back his proposed tax increases.

Legislators have held off plunging too deeply into the budget process until the release of the new economic report.

“Well this is a relief,” said Rep. Leon Lillie, DFL-North St. Paul. He said the revised numbers would let lawmakers consider jettisoning some of Dayton’s less popular tax proposals, though he said spending the additional money should also be part of the discussion.

“If there’s one thing we’ve learned so far this session, it’s that there’s so much need out there,” said Lillie, an assistant House majority leader.

A new projection for the budget year that closes in June shows a surplus of $295 million. Almost all of it is required to be used to pay IOUs to Minnesota schools, reducing a backlog in deferred payments to $801 million.

Minnesota has lurched from deficit to deficit for most of the past decade, and lawmakers have resorted to temporary fixes to get by. They have delayed school aid payments, borrowed against a tobacco lawsuit settlement and plugged in one-time federal stimulus dollars for programs that require ongoing spending.

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