Minnesota received some good news today. The February budget forecast showing a projected budget deficit of $627 million, an improvement of $463 million from the November budget forecast that showed a projected deficit of $1.1 billion.
The new forecast is a positive sign that Minnesota’s economy is experiencing a fragile recovery. The state seems to be heading in the right direction. Most of the savings come from improved job and economic growth. In fact, we will be back to pre-recession levels in job creation by the end of this year. The rest of the country will get there nine months later.
Unfortunately, the improved forecast number does not change the fact that Minnesota still faces a $627 million budget deficit. For too long our structural budget challenges have been ignored or swept under the rug with budget gimmicks and borrowing. Although we made major progress in paying back our schools by $290 million, we still owe schools $800 million more.
Since Minnesota began running budget deficits in 2002, the solutions to those deficits have relied heavily on spending reductions and temporary solutions, but very little on tax increases. In fact, during this period spending cuts have been used at nearly five times the rate as tax increases.
After more than a decade of budget cuts, a fair and stable budget must include both cuts and new revenue to erase our budget deficit while allowing us to make key investments in Minnesotans’ shared priorities such as schools, colleges and universities, nursing homes, our rural transportation system, and property tax relief for farms, businesses and homeowners.
It’s vitally important the legislature make responsible budget decisions to ensure we don’t disrupt this positive economic progress. It is widely believed that a careful balance of spending cuts, responsible new revenue and targeted government reforms is the sensible combination needed to solve the deficit and support continued economic recovery. State Economist Tom Stinson, who has served under Republican and Democrat administrations, confirmed that a balanced approach – one that uses some spending cuts and new revenue is the best budget solution for Minnesota.
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