Lawmakers, analysts brace for possible $4B budget deficit

State lawmakers are now bracing for a deficit that some analysts predict will reach $4 billion. House and Senate leaders met Friday at the State Capitol, to discuss some of the dramatic steps they might have to take next year to balance the books.

In two weeks, state officials are scheduled to unveil an economic forecast that will guide early budget discussions in the 2009 session, and all signs point to a tough road ahead.

During his weekly radio show, Governor Tim Pawlenty said he's expecting a substantial, multi-billion dollar budget deficit next year. The Republican governor also suggested the budget solution lies in spending restraints. Pawlenty said state government can't be growing when the economy is not.

"So you can't expect state government to continue to have spending that's 6 percent, 9 percent, 10 percent a year," Pawlenty said. "It just doesn't work. That math doesn't work. So we're going to go through a debate in this state and every other state in the country and the federal government as well about government living within its means just like everybody else is having to tighten their belts for sure right now as well.

At the State Capitol, House and Senate leaders were already beginning that debate. Members of the Legislative Commission on Planning and Fiscal Policy heard a budget presentation that tried to put a finer point on the coming pain. House and Senate fiscal analysts stressed that their calculations weren't as comprehensive as those made by state finance officials.

Still, they presented a chart showing a projected budget shortfall for the next biennium that has grown to roughly $4 billion.

"That is a frightening, frightening chart," said DFL House Speaker Margaret Anderson Kelliher.

Kelliher said global economic upheaval is hitting home in Minnesota, and the numbers should have a sobering affect on all decision makers. The Minnesota Legislature is constitutionally bound to balance the budget, but Kelliher said this time it has to be more than an accounting exercise.

"It's less about how the numbers look and more about what these outcomes are," Kelliher said. "Will people be able to see, will decision makers be able to measure that we are actually achieving goals and outcomes that we have talked about achieving?

"The only way that that will happen is through at least a different look at our budgeting process and a redesign of that budgeting process," she said. "And it has to begin somewhere, so it might as well begin this year and with this Legislature."

The new approach would also mean no more automatic carryovers from the previous budget. DFL Senate Majority Leader Larry Pogemiller said finance committees will start from scratch and examine every nook and cranny of current spending. Pogemiller said state government will have to stop doing some things, and he already has a target in mind.

He said the Department of Employment and Economic Development needs a total revamping and new leadership.

"I think what we're doing currently in economic development is not working," Pogemiller said. "The data is pretty clear. We used to lead the nation in income growth and have lower unemployment than other states. And we have fallen to the middle of the pack, and that's not acceptable. I think just from my personal perspective, that's an area where I'm very interested in changing course."

Pawlenty spokesman Brian McClung said the governor welcomes ideas to reform government and reduce spending. But, he said cutting programs that grow jobs during bad economic times might not be a good place to start. The 2009 Legislature convenes on January 6.

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