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Letter: Focus must remain on improving business climate

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Last week, I was briefed on Minnesota's most recent budget projections and found that the November forecast contains both positives and negatives.

For the remainder of the 2013 fiscal year, Minnesota shows a projected $1.3 billion surplus, but for the upcoming 2014-15 budget cycle, state economists anticipate a $1.1 billion deficit. This is much better than the projected $6.2 billion shortfall we faced two years ago. It's also worth noting that we now have $994 million in budget reserves, and in 2010 we had nothing, which could almost eliminate this deficit number on its own if it was taken into consideration.

By law, the $1.3 billion surplus for 2013 will be used to pay off half of the school funding shift that had been enacted by previous legislatures in order to help the state balance the budget. After this payback, the state owes $546 million on the school shift (to bring the aid payment schedule to 90/10) and then $555 million on the property tax recognition shift.

While fiscal experts found the economy is projected to grow at a lower rate than expected; it doesn't necessarily mean a recession is coming. They note that a foundation is being put in place for an extended period of stronger economic growth. Interest rates are low, corporate balance sheets strong, and the housing and auto industries appear poised for a breakout, but short-term uncertainty continues to plague this recovery.

Economic analysts also say the effects of the European recession, Europe's sovereign debt crisis, and China's economic slowdown on the U.S. economy are all unknown. The downside risk is so substantial that many businesses are nervous, and believe it prudent to delay investment and hiring decisions until some of the uncertainty is resolved.

Falling off the federal fiscal cliff could throw us in another recession, experts predict. Forecasters are assuming that the perfect storm of tax increases and expenditure cuts scheduled to begin on Jan. 1, 2013, will somehow be avoided and that the economy will escape unscathed. However, until federal fiscal policy is seen to be taking a less damaging course, businesses will be reluctant to add jobs.

I am confident that President Obama and Congress will strike a deal that avoids the fiscal cliff, but we should also keep in mind that Minnesota has been a very good state in terms of economic growth and outpacing the unemployment rate national average. Going forward, our focus must remain on encouraging job growth and improving the business climate in this state. Doing so will create a permanent solution to our unstable economy.

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