Letter: Budget still a challenge despite better outlookWhile the state’s economy is improving, a massive budget deficit remains.
By: Dist. 22A Rep. Doug Magnus, R-Slayton, Worthington Daily Globe
While the state’s economy is improving, a massive budget deficit remains.
State economists said Minnesota’s current financial shortfall now totals $994 million, down from the previous November projection of $1.2 billion. But next year, projections show that lawmakers could face a $5.8 billion deficit when they return to the State Capitol in January.
Minnesota added more than 15,000 jobs in January, which is the largest one-month gain in employment since April 2005. But the problem is unemployment remains at 7.3 percent, which will further hinder our economic recovery.
Seventy-five percent of Minnesota’s revenue comes from two sources: income and sales taxes. When the economy falters, more people lose their jobs or have their hours and/or wages reduced.
When folks aren’t working as much or making as much money, they obviously don’t pay as much income tax. Consequently, they’re forced to spend less on goods and services, leading to lower sales tax returns.
Minnesota continues to spend money on state government programs at an alarming rate. When Gov. Pawlenty eliminated $2.7 billion from the budget last session, it marked the first time since 1960 that state spending decreased from the previous biennium.
For historical references, the first $1 billion biennial budget occurred in 1968-1969. It took eight years to double state spending to $2 billion. Prior to Gov. Pawlenty’s unallotment last year, Minnesota was on pace to spend more than $33 billion.
The question lawmakers now face is how we are going to match low revenues with our expenses. Sure, we’ll be able to fix the financial problem in the short term, but it’s clear that if we don’t enact policies this session that put more people to work, our sales and income tax collections will remain low and we will continue this nasty cycle of state budget deficits.