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651-201-8014 Longer and Deeper Recession Forecast but Federal Stimulus Helps in the Short-Term St. Paul – The State of Minnesota faces a $4.6 billion shortfall in FY2010-11 according to today’s economic forecast released by Minnesota Management & Budget (MMB). The $4.6 billion shortfall in FY2010-11 is $278 million less than forecast in November. This is primarily due to the federal stimulus offsetting a $1.2 billion reduction in forecast revenues. Without the federal assistance, the projected state shortfall would be $6.4 billion. Of the federal funds in the stimulus package, only the Federal Medical Assistance Percentage (FMAP) funds are included in the forecast. Unlike other stimulus funds, the state can recognize these funds within current law. The FMAP change is expected to reduce state expenditures $464 million in FY2009 and $1.359 billion in FY2010-11. “The federal stimulus has helped cushion the blow of a deteriorating economy,” according to MMB Commissioner Tom Hanson. “Nonetheless, this is very sobering economic news.” Forecasters now expect a longer and deeper recession than was assumed in November. Real GDP is expected to begin growing again by early fall but job growth is not expected until 2010. Today’s forecast anticipates real GDP will fall by 2.7 percent in 2009. The November forecast had shown a 1 percent decline. Federal stimulus dollars arriving this year should be sufficient to offset revenue declines expected in the current fiscal year. A FY2009 balance of $236 million is a result of the state’s drawdown of the budget reserve and Governor Pawlenty’s unallotment of $271 million. The November [sic] forecast had projected a $426 million deficit for the remainder of FY2009. A complete report of the November forecast can be found on Minnesota Management & Budget’s website at www.mmb.state.mn.us. --30-- http://www.mmb.state.mn.us/press-march03 | |||||||||||||||||||||
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