5.2. SR 03-10-2003 - Laserfiche WebLink

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LinC Ci ie Bul]efin Number 9 March 5, 2003 State deficit deepens slightly Gary Carlson The Minnesota Dept. of Finance released the updated state budget forecast Feb. 27, announcing that the state deficit is projected to increase by a remarkably small $11 million for the balance of the current biennium and by an additional $14 million for the 2004-05 biennium. Finance Commis- sioner McElroy suggested that the February forecast might be one of the smallest forecast adjustments in recent memory. With the revised deficit projection, the governor will now have to revise the 2004-2005 budget he proposed just two weeks ago. In the confusing world of state government finance, the governor will have to identify an additional $125 million in spending reductions--even though the deficit has only grown by $25 million. Why? The explanation is confus- ing. Essentially, the governor's proposed budget for FY 2004-2005, released Feb. 18, included most of the expected reductions in state program costs reported in last week's forecast. How- ever, his proposed budget did not include any of the revised reductions in revenues that were included in this latest forecast. The governor will release a supplemental budget within the next two weeks that will include recommen- dations on plugging the $125 million hole. Although there were no clues revealed at last week's budget forecast press conference about where the governor might turn to find the additional savings, it is certainly possible he could recommend additional cuts to city state aid programs as a way to cover the additional $125 million. Questions about the future Commissioner McElroy acknowledged that the state's economic forecasting firm currently has one of the most optimistic forecasts for economic growth among the major economic forecasting firms. He went on to stress that the economic and geopolitical uncertainty the country is now facing make this forecast a potentially more risky and volatile projection. Commissioner McElroy did not rule out the possibility that the state could prepare an additional forecast before the end of the legislative session if economic and world political circumstances indicate that the state's economic performance-and therefore the state's budget---changes substantially. Unless the governor and the Dept. of Finance decide to prepare an additional forecast, the February announcement will become the final forecast used by the governor and Legislature to craft a 2004-2005 state budget. Of course, state budget forecasts will continue to be prepared every December and February. And next year when the Legislature returns, there could be additional mid-course corrections needed to accommodate any fluctuations in those future budget forecasts. ~ THE 15-Minute dvocate IREAD · CONSIDER · TAKEACTIONI Senate schedules hearing on bill to freeze wages of public employees The League supports local decision-making authority, and opposes legislation intended to interfere in local employment-related decisions. Share your perspective on the impacts of this legislation on your city, and discover key points to consider when discussing this bill. See page 5for details.