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February
28, 2008 |
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February
forecast released: $935 million deficit in current
biennium The
Minnesota Department of Finance revealed the February 2008 economic
forecast today predicting a state budget deficit of $935 million for the
current biennium. The legislature may, but is not required, to act
before the conclusion of this legislative session to bring the budget back
into balance. The current budget deficit status gives the Department
of Finance the authority to initiate the un-allotment process, which
allows Governor Pawlenty to reduce general fund spending to close the
gap. Last
November a $373 million deficit was predicted, and revenues from the
individual income tax and corporate income tax were sharply lower than
expected. From the end of the 2007 legislative session, revenues
have declined by $1.27 billion and spending has increased by $130
million. A $1.1 billion deficit is projected for the FY2010-11
biennium, not including inflation. Factoring inflation into the
coming biennium brings the total projected deficit to approximately $2.126
billion in FY2010-11. State
Economist Tom Stinson commented that this worsened deficit projection is
the result of the current U.S. economic woes; although he expects the
current recession to be shallow and short and that the economy will return
to growth in the second half of this year. However, he did express
caution about the large uncertainty surrounding this forecast and
indicated that energy prices could have a dampening effect on the economy
should the price of oil remain above $75 per barrel throughout the
summer. Stinson indicated that he expects the federal stimulus
package to have a significant positive impact on Minnesota economy and
expected that the checks received over the spring and summer would help
pull the economy out of the recession. The
February forecast is based on current law. At the time of its
preparation the recently transportation bill had not yet become law over
the governor’s veto. (The transportation bill’s FY2010-11 general
fund impact is estimated to be over $86 million.) A large influx of
jobs resulting from this bill, along with the effects of a potential $825
million bonding package may give the state a brighter economic outlook
when the November forecast is released, although it is too early to gauge
the exact impact such proposals might have. The forecast also did
not incorporate the $40 million expenditure in the pending I-35W
compensation bill and For
more information contact:
Joe Mathews, AMC General
Government & Taxes Policy Analyst *ADMINISTRATORS
/AUDITORS: Please share a hard copy of all AMC UPDATE emails with
any county board members who do not have email. **If
you do not wish to receive these emails in the future, please reply to
this message with the word ‘REMOVE’ in the subject line. |
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Association
of Minnesota Counties 125
Charles Avenue Saint
Paul, MN 55103-2108 Phone:
651.224.3344, Fax: 651.224.6540 |
