Latest forecast: Minnesota economy "sick"
Minnesota is looking at a projected $373 million deficit over the next 19 months, according to a budget forecast released Friday.
This gap, which Gov. Tim Pawlenty called â€śmanageable,â€? comes after several years of surpluses.
If the present economic situation continues, lawmakers and the governor will need to seek out ways to fill in the shortfall â€“ either through cutbacks, other sources of revenue or the use of reserves.
Pawlenty said the deficit, which barely over 1 percent of the stateâ€™s $34 billion budget, reflects an economic slowdown affecting the entire country. Economists blame high energy prices, break-even job growth, a deflated housing market and credit market trouble for decreasing Minnesotaâ€™s tax collections. Sales tax, corporate tax and taxes paid on mortgages and home deeds are all down, according to the forecast.
But Minnesotaâ€™s projected shortfall isnâ€™t the worst weâ€™ve had â€“ consider 2003, when Minnesota lawmakers had to bail out a budget deficit of $4.6 billion.
The state also has about $1 billion in a cash account and reserves to depend on.
Even so, the forecast calls Minnesotaâ€™s economic outlook â€śvery fragile,â€? with state economists adding that there is 35 percent change of a recession.
Capitol officials reacted to the deficit prediction with diverging proposals, with lawmakers and the governor calling for everything from an immediate special session to a tax-cut plan.
Since the state must have the budget balanced by mid-2009, lawmakers and the governor could technically wait to see where the economy turns before acting.
But policy-makers note the budget forecastâ€™s prediction that the gap between revenue and spending is expected to stay around until at least 2011; they suggest quicker fixes.
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