Minnesota predicts $5.28 billion deficit over next two years
Minnesota faces a $5.28 billion budget deficit over the next 2 1/2 years, reported the Pioneer Press on Friday.
The Pioneer Press reported state finance experts on Thursday forecast a $4.85 billion shortfall for the next two-year state budget, and a $426 million hole in the current budget, ending June 30.
But this is not the worst deficit Minnesota has seen. The 1980-82 budget crisis brought the worst deficit to Minnesota, with huge spending cuts and tax increases.
The current problem, however, is "similar in size and scope" to the $4.56 billion gap Pawlenty and lawmakers faced in 2003, said Tom Hanson, commissioner of Minnesota Management and Budget.
The main cause reported of the predicted budget deficit is a national recession that is far worse and expected to last much longer than anticipated, reported the Star Tribune.
According to state economist Tom Stinson, this recession will be the worst in 25 years ans possibly the worst since World War II.
The current economic forecast is just plain ugly," Stinson said.
Because of the struggling economy, taxpayers are earning less, consumers are spending less and state tax collections are dropping.
Forecasters predict that over the next two years, state revenue will drop $3.3 billion, which is 9.4 percent less that earlier estimates, to $32 billion.
According to the Center on Budget and Policy Priorities, 41 states face budget deficits.