Minnesota faces $1.1 billion budget deficit in 2013-14 - KMSP-TV

Minnesota faces $1.1 billion budget deficit in 2013-14

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ST. PAUL, Minn. (KMSP) -

Minnesota faces a $1.1 billion projected budget deficit for the 2014-15 biennium, the state budget office said Wednesday.

Though $1.1 billion is the smallest deficit in some time for the state, it's also a number that would grow substantially if the federal economy hits the fiscal cliff of spending cuts and higher taxes.

Under a fiscal cliff scenario, state economist Tom Stinson predicts Minnesota would cut 115,000 jobs in 2013-14, and personal income would drop more than 4 percent by 2015. He also estimated state tax revenue would drop by hundreds of millions of dollars.

Gov. Mark Dayton was among a committee of governors who met with President Obama on Tuesday, seeking assurances that any spending cuts wouldn't shift the nation's financial burden onto states.

A seven-month stalemate between Gov. Dayton and Republican leaders stretched into a three-week Minnesota government shutdown in 2011. Dayton had pushed for a mix of spending cuts and upper-income tax increase, while Republicans refused any tax hikes. Dayton eventually dropped his pursuit of tax increases and agreed to bond money from a tobacco settlement and delays in school aid payments to soften the size of spending cuts.

Current budget conditions will allow the state to reduce the K-12 education shift by $1.3 billion of the $2.4 billion outstanding, but that improvement does not continue into the next budget period.

Budget deficits have been common in Minnesota for much of the last decade. After the national economy plummeted in 2008, deficits here ballooned. Former Gov. Tim Pawlenty and lawmakers faced a $5.27 billion deficit in December 2008. Two years later, incoming Gov. Dayton and a new Republican majority came into office looking at a $6.2 billion deficit.

This year, Dayton has the backing of fellow Democrats after the party took control of both the Minnesota House and Senate for the first time since 1991. On Wednesday, he said it's "very likely" he will push for higher income taxes on the state's wealthiest residents.

Dayton plans to release a full budget proposal in mid-January, but declined to offers specifics; however, he said he still believes -- as he did when he ran for office -- that the wealthiest 2 percent of Minnesotans can afford to pay more in taxes.


Information from the Associated Press was used in this report.

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