Editorial: Forecast improves, but clouds linger

The headline that state economist Tom Stinson most wants to see atop reports about Minnesota's slightly smaller state deficit is "outlook improves." Minnesota is at the tentative start of an economic recovery that Stinson predicts will be long and slow. It could use the shot of consumer confidence that upbeat headlines might bring, he told Capitol journalists on Tuesday.

We'll oblige him. Tuesday's forecast was a good deal less grim than the one he made a year ago.

Yet a cautionary "but" must accompany Stinson's suggested summary. The latest forecast still shows U.S. employment not returning to 2008 levels until mid-2012. It projects a billion-dollar gap between scheduled state spending and revenue between now and June 30, 2011.

The small improvement in the state's bottom line since the last forecast three months ago is not the result of an economic reawakening. Rather, it comes in large part from the latest one-time dose of federal Medicaid money.

What's more, the latest projection shows a fearsome fiscal challenge awaiting the next governor and the 2011 Legislature -- a revenue shortfall in 2012-13 that, when inflation is fully factored in, tops 18 percent of the cost of spending commitments on the state's books today. (See the box to the right.)

The 2010 Legislature and Gov. Tim Pawlenty are constitutionally obliged to erase the $1 billion deficit in the 2010-11 budget. They ought to feel morally obliged to do so in a way that brings the projected 2012-13 problem down, if not to zero, then to a much more manageable size.

Repeatedly in the past decade, state lawmakers patched budgets together in ways that left a widening future gap between spending commitments and the revenues that pay for them. That gap was already growing before the recession. Wait until next year to enact permanent measures to close it, and the adjustments required to do the job will be so harsh that they could put recovery and the state's future prosperity at risk.

The first month of the 2010 session has produced too little evidence that the GOP governor and DFL-controlled Legislature are moving in that direction. Pawlenty's Feb. 15 budget proposal includes more than $500 million in one-time money -- some of it federal funds that have not yet been appropriated by Congress, and may not be.

DFLers have yet to put their own budget proposal on the table. Pawlenty called on them yesterday to do so by March 17. It's a deadline they ought to meet, so that Minnesotans have ample time before the session's constitutionally required May 17 adjournment to understand and respond to all of the ideas that are in play at the Capitol.

One month of lawmaking effort has produced plenty of partisan rancor, veto threats, dueling news conferences, closed door confabs, a major bill's veto and, on Monday, an unsuccessful veto override attempt. To the shared credit of all involved, it has also produced continuing efforts to reach accords on bills authorizing building projects and continuing to provide health care services for the state's poorest citizens.