Top State Lawmakers React to $1.1B Deficit Forecast

By KBJR News 1

December 5, 2012 Updated Dec 5, 2012 at 7:32 PM CDT

St. Paul, MN (NNCNOW.com) - Minnesota budget officials fear the state's projected deficit could be worse if a federal tax deal isn't made by January 1st.

The state budget forecast for the 2014-2015 biennium, released Wednesday, shows a $1.1 billion deficit.

Lawmakers on both sides of the aisle used words like "uncertainty and confusion" after getting a look at the forecast.

The Commissioner of Minnesota Management & Budget said new lawmakers will have some big decisions and heavy lifting in the session ahead, saying balancing the budget won't happen naturally.

But despite that state economists were quick to say this isn't a gloomy forecast and in fact it shows the economy is recovering, albeit at a slow pace.

Officials say current conditions 'will' allow the state to pay back $1.1 billion in school aid of the $2.4 billion owed. However, that won't continue into the next budget period.

Minnesota GOP leaders said the forecast is good news, especially if you compare it to the budget deficit of $6.2 billion two years ago.

DFL leaders say the numbers are just a starting point.

"I'm generally pleased we're making some headway in paying the school shift what continues to nag me some is we still have a fiscal crisis ahead of us in the next biennium with inflation, something just north of $2B to resolve," said Senate majority leader Tom Bakk (DFL- Cook).

"This represents a confirmation of the wisdom of the Republican majority's approach to managing the state fiscal situation that we inherited two years ago," said Senate Minority leader David Hann (R - District 42).

Governor Mark Dayton promised no gimmicks during a news conference. He said he is "very likely" to propose an income tax increase on the wealthiest in the state, a move being met with opposition from the GOP.

"The budget I proposed last year to the legislature raising income taxes on the wealthiest 2 percent of Minnesota would have given us a balanced budget," the Governor said. "We would have not had to borrow $750 more from the schools and we'd be able to carry it forward."

State economists say if the US plunges over the fiscal cliff there is potential for revenue loss exceeding $1.7 billion in 2014-2015. Unemployment would rise too.

Kevin Jacobsen
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