Minnesota budget forecast: Shortfall now $627M, down from $1.1B

/ 28 February 2013 / eunice

Bill Salisbury, Pioneer Press, February 28, 2013 –┬áMinnesota state finance officials are forecasting the state will face a $627 million budget deficit in the next two years, a sharp reduction in red ink from the $1.1 billion shortfall state economists predicted in December.

That means Gov. Mark Dayton and the Legislature will have to make $463 million less in tax increases or spending cuts to balance the budget than they anticipated three months ago.

The forecast also has good news for schools: It projects a $295 million fund balance in the state treasury at the end of the current fiscal year on June 30. State law requires $290 million of that money go to pay off part of the $1.1 billion the state owes schools in delayed payments.

The state will still owe schools $801 million, but the news eases pressure on Dayton and lawmakers to find more money to buy back the shifts.

The updated economic forecast released by the Department of Minnesota Management and Budget sets the tone for a legislative debate over a two-year budget that starts July 1 and runs through June 2015.

The last forecast, released in December, showed a $1.1 billion deficit, and that’s what Gov. Mark Dayton relied upon to build his budget. He will release a supplemental budget in March to account for the changed projection.

Legislators have hesitated from plunging too deeply into the budget process until receiving the new economic report.