State faces $1.1 billion projected deficit over next two years

By T.W. Budig, ECM Capitol reporter

Minnesota is facing a projected state budget deficit of $1.1 billion in the next two-year budget cycle, according to the Minnesota Management and Budget (MMB).

Still, current conditions allow the state to pay back $1.3 billion on the outstanding $2.4 billion K-12 budget shift crafted last session in an end of session budget deal by Democrats and Republicans.

The school shift figured prominently in the last election, Democrats citing it as an example of bungled budgeting.

“Since it automatically goes to pay the shift under current law, we would not call it a surplus,” said John Pollard, MMB communications director, of the school shift paydown.

The paydown reflect the projected outcome of the current two-year budget cycle.

MMB officials later this morning will further detail the November state budget forecast, with legislative leaders later offering comment.

Democratic Gov. Mark Dayton is expected to speak on the forecast later this afternoon.

Forecasters earlier this year projected a budget deficit for the upcoming spending cycle, so this morning’s numbers are not surprising.

Since inflationary affects are not incorporated into budget forecasts, the $1.1 project deficit may cast a longer shadow when they are.

One larger shadow overcasting all is cast Democratic President Barack Obama and Congress as lawmakers in Washington attempt to deal with the so-called “fiscal cliff” awaiting at year’s end.

State Economist Tom Stinson has previously warned events in Washington — the chance of automatic tax increases and budget cuts called for in the Budget Control Act — could markedly impact the nation’s economy.

While the November economic forecast is closely watched by lawmakers, the February forecast, which appears during the legislative session, provides the final numbers lawmakers incorporate into budget bills.

Unions were quick to comment on this morning’s numbers, calling for tax increases.

“Any surplus disappears if the state accounts for inflation and pays back the school shift,” explained Eliot Seide, director of AFSCME Council 5, Minnesota’s largest public-employee union, in a statement.

“If Republicans are looking for massive spending cuts, they’ve already done that with a decade of disinvestment,” said Seide.

Minnesota AFL-CIO President Shar Knutson offered similar comment.

“If we want to continue to have strong schools, a 21st century transportation infrastructure, create family-sustaining jobs, and care for those unable to care for themselves, Minnesota will need a significant influx of new tax revenue,” she said in a statement.

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