Minnesota forecast: $1.2 BILLION in red ink

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State economist Tom Stinson released the November 2009 budget forecast yesterday, and the numbers are grim: a looming $1.2 billion shortfall in the 2010-2011 biennium and a staggering $5.4 billion deficit in 2012-2013. This is by far the biggest news in Minnesota today – yes, much bigger than the headlined Petters conviction, the rally at the capitol for a new Vikings stadium, or the MOA apology to Sarah Palin. The shortfall is due to declining employment and income for Minnesotans, which results in lower tax collections. The governor’s initial response was to talk about delaying local government aid (LGA) due to be paid to local governments in December, and to slash LGA for next year. Of course, he won’t consider raising tax rates, even on the wealthiest Minnesotans, even though LGA cuts will mean less police and fire protection, less road and highway maintenance, and less money for medical care and schools.

Stinson said that the recession is over, but that recovery will be extremely slow.

Minnesota’s October unemployment rate was well below the national average, but that does not mean the state’s economy has avoided the worst of this recession. … Employment in Minnesota is now expected to fall by more than 150,000 jobs between the first quarter of 2008 and the first quarter of 2010, 30,000 more than projected last February. If this forecast holds true, more than a decade of job creation will be lost. The combination of substantial current and expected  job losses and what is expected to be a slow recovery, leaves Minnesota employment below its pre-recession level through 2013.

Here are links to the report itself, and to insightful commentary:

• Summary of the report (pdf, 9 pages)
• Full text of the report (pdf, 77 pages)
• Press conference handouts (pdf, 9 pages, mostly tables and graphs)
• MPR report:

After seeing the forecast, Gov. Pawlenty repeated his long-standing opposition to tax increases of any kind. He said the budget should be balanced by spending cuts alone. Pawlenty also said he may be forced to unilaterally cut state aid payments to cities and counties known as LGA.

“For the most part, we are going to wait and invite the Legislature to join us in trying to find a collaborative solution to this challenge, but we may not be able to do that entirely as it relates to some payment schedules,” Pawlenty said. “One of them could be the LGA payment schedule at the end of December.”

• Minnesota Budget Bites calls for “long-term solutions to long-term problems,” and insists that tax increases are one part of the solution:

We need to raise revenues to help us resolve the current deficit – and future deficits. We can’t solve the whole problem by raising revenues, but it is unsustainable to continue to address budget deficits almost entirely by relying on one-time resources, spending cuts and budget gimmicks. Not only are those decisions hurting Minnesotans who need help the most during the current economic downturn, but they are also reducing the investments Minnesota needs to position our state to take advantage of an economic upswing. We wouldn’t be alone in raising taxes. Nationwide, 35 other states are currently facing budget deficits. And during the last year, at least 30 states have enacted tax increases to help close budget holes. It’s our turn.

• The Minnesota Association of Professional Employees (MAPE) noted in a press release that “Last May, MAPE outlined millions of dollars in waste that included out-of-state travel, uncollected revenue and the Pawlenty Administration’s bloated management. The result of MAPE shining the light on certain administration practices was $10 million trimmed from out-of-state travel and the Department of Revenue stepping up collection efforts on money owed to our state. These are positive steps, but more action is needed to cut waste to preserve vital services for Minnesotans.” The May MAPE press release identified $350 million in proposed savings.

• Politics in Minnesota offers Steve Parry’s analysis of the amount of money being spent, month by month, and the implications for unallotment and budget cuts.