editorials

"Serious but solvable." That's how Gov. Tim Pawlenty described the $935 million gap that has popped open in the state budget through June 30, 2009.

It's an apt description, if the problem identified by Thursday's new state revenue forecast were confined to the state budget. The forecasted gap between revenues and expenditures amounts to about 4 percent of the unspent share of the current two-year budget, which runs through June 30, 2009.

With 16 months remaining before that deadline for a balanced budget, and with more than $650 million in reserves, legislators and the governor have enough time and tools to close the gap in an orderly fashion. It will require some creativity and political exertion -- but most of the state's lawmakers have all seen, and solved, money problems much worse.

But to their credit, leaders of both parties indicated yesterday that they aren't looking at the new deficit through government blinders. They understand that lagging state tax collections signal something bigger than tight money for government. Rather, the deficit is the latest in a mounting pile of evidence that something is amiss with the state's economy. Job growth has slowed considerably in this decade, and the state's per capita personal income ranking has fallen.

Accurately diagnosing and correcting that larger problem are the real challenges before the Republican governor and DFL-controlled Legislature for the remainder of this session and beyond.

They'll do well to pay heed to the analysis of the problem state economist Tom Stinson provided yesterday. He described a state budget gap caused not by excess spending -- which has stayed within budgeted parameters -- but revenue erosion, caused more by shrinking corporate profits, capital gains and durable goods purchases than by job losses.

That's consistent with an economy that's lacking both skilled workers and capital investment. What's increasingly evident is that the two governing parties see opposite halves of that problem.

DFLers are quick to advocate for more and smarter investments in education and research to address the looming workforce shortage. Pawlenty indicated yesterday, as he did at his State of the State message, that he's worried about lagging business investment in the state, and believes tax cuts targeted at entrepreneurs are the right remedy.

On how to balance the state budget, they voiced remarkably similar ideas. Pawlenty and DFLers agree that general tax increases should be avoided; that K-12 education and nursing homes should be spared from cuts; that state agencies should brace themselves for less revenue.

But when it comes to crafting a strategy for helping restore Minnesota's economy to its customary vigor, bipartisan agreement is a long way off -- but is worth every effort to achieve.