Some hope for improvement in new budget forecast

Gov. Pawlenty and state lawmakers will get a better idea of Minnesota's financial picture today when state finance officials release a new budget forecast.

Minnesota is currently facing a $1.2 billion budget deficit but some are hoping the state's economy has bottomed out.

Late last year state finance officials said it was largely a lack of jobs that left Minnesota with a $1.2 billion shortfall, and with the state down 80,000 jobs in 2009 and no job growth at the end of last year, no one is expecting any wild swings in Minnesota's fortunes. State Economist Tom Stinson made that clear a few weeks ago.

"Anybody that thinks that we're gong to generate $1.2 billion in new revenue to solve the problem is dreaming," Stinson said. "But anybody who's having nightmares that we're going to give them $2.5 billion rather than a $1.2 billion problem, they're probably going to be relieved that we're not going to be there."

Gov. Tim Pawlenty and legislative leaders say status quo or even a slightly smaller budget deficit is good news. Pawlenty said he's worried about the economy after the federal stimulus runs out, but he says he is hopeful the state's budget outlook will improve in the near term.

"Anybody that thinks that we're gong to generate $1.2 billion in new revenue to solve the problem is dreaming."

"I do have, in the longer-term, some concerns about a double dip here if the private sector doesn't pick up the slack," Pawlenty said. "But I think for purposes of the forecast, my guess is that it's not going to be the worse and it might be the same or even a little bit better."

Pawlenty already released his plan to fix the state's budget deficit. He's relying on spending cuts, exhausting some pots of one-time money and an extension of federal stimulus money that hasn't been enacted into law yet.

DFL legislative leaders say they're waiting for the forecast to put their budget fix together. DFL House Speaker Margaret Anderson Kelliher said she's also cautiously optimistic that the forecast will show the economy at least holding its own.

"Our hope is that we're actually close to the ballpark of what we knew in November and our situation is not drastically worse in the state," Kelliher said.

Her optimism might not last. Since Pawlenty is opposed to tax increases, it's likely that any plan to erase the deficit will have to include big cuts in government spending.

Most of the easy spending cuts have already been made, which means Democrats will face a series of tough decisions.

Then there's the long-term budget problem. Minnesota is facing a deep budget deficit in the next two-year budget cycle, and it might be difficult to fix that problem unless there are permanent spending cuts, new revenue or the state's job picture improves dramatically.