Inside the budget deficit

  • Updated: January 5, 2011 - 6:33 AM

FIVE ANSWERS TO BIG QUESTIONS

WHAT'S THE PROBLEM?

Minnesota faces a $6.2 billion budget shortfall over the next two years. The shortfall equals about 20 percent of state spending, about $1,192 for each resident of the state.

WHY CAN'T WE JUST CUT SPENDING?

Education and health and human services eat up 65 percent of the state budget, so it would be difficult to make significant cuts without touching those politically explosive areas. Shutting down all of state government and eliminating money for public safety wouldn't come close to fixing the problem.

HOW ABOUT RAISING TAXES?

There's no easy answer with raising taxes, either. Increasing taxes on high earners the way Gov.-elect Mark Dayton proposed during the campaign would raise only $1.9 billion. Another plan to lower but expand the sales tax to include clothing and other services would raise just $1.3 billion.

HOW WILL POLITICS PLAY IN?

There's a deep ideological divide between DFLer Dayton and Republicans who will take over the Legislature. Dayton has said he wants to raise taxes on high earners, but GOP legislative leaders are holding firm that tax increases will not be used to solve the state's budget mess.

WHAT'S AT STAKE?

If lawmakers cut too deep, local governments would likely have to eliminate or reduce services, like neighborhood crime prevention, restaurant inspections and plowing. If the state relies too heavily on one-time fixes or payment delays, investors might demand the state pay higher interest for taxpayer-backed projects.

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