In one sense, nothing has changed at the State Capitol. Thursday's budget forecast largely confirmed what Minnesotans have known for six months: The 2011 Legislature and the next governor must set a 2012-13 budget that starts out roughly $6 billion in the red.
But in another sense, much has changed. The new year will usher in a new cast of decisionmakers. The new Republican majorities, new leaders in the DFL minority and a new governor will take over -- hopefully, in January. Together, they have a chance to make a fresh start at solving what has become a chronic malady in state finances. For most of the past decade, tax revenues have not kept pace with the spending obligations enacted in law. The No. 1 task facing the next class of leaders is to get the state's fiscal house in lasting order.
Thursday's forecast eased some worries about the short term. Neither lame-duck Gov. Tim Pawlenty nor his as-yet-undetermined successor will be forced to confront and close an immediate gap between spending and revenue. Thanks largely to a second wave of one-time federal stimulus money, the 2010-11 biennium appears set to end June 30 in the black by $400 million.
That's good news -- and not just for the governors who are coming and going. One need only witness the struggle in Washington to get anything done in the midst of a partisan power shift to be gratified that Minnesota will be spared similar hostilities in St. Paul, at least for now.
But there's nothing rosy about the long-term fiscal prospect outlined on Thursday, nor about its implications for the work that state and local governments do to keep Minnesotans safe, healthy and prosperous. A budget gap this large cannot be closed without actions that in one way (tax increases) or another (spending cuts) affect nearly every citizen.
Republicans, led by Pawlenty and gubernatorial nominee Tom Emmer, have been dismissive of the $6 billion deficit forecast. Again yesterday, Pawlenty referred to it as "fictional," the product of "irrational" DFL decisions about health care, education, aid to local governments and more. GOP leaders note that forecasted state revenues for the coming biennium are $32 billion, $1.7 billion more than the state is spending in 2010-11. That amount, they say, is available to increase state spending.
But the GOP analysis fails to acknowledge that in 2010-11, Minnesota has been buying government services at a one-time discount. Its $30.3 billion in 2010-11 is buying roughly $34.5 billion in government services, thanks to $2.3 billion in federal stimulus money that's nearly run out and an IOU sent to school districts.
That IOU comes due in 2012. The budget forecast assumes it will be paid on time. Delaying its payment would subtract $1.4 billion from the $6.19 billion forecasted deficit. Making permanent the one-time spending cuts enacted first via Pawlenty's 2009 unallotment, then by the 2010 Legislature, would shave another $660 million from the total.
