MHTA – Minnesota Management & Budget has released a forecast which shows that the state faces a $1.1 billion dollar projected budget deficit for the 2014-15 biennium. The governor and legislature will rely on the forecast and updated estimates to enact a new state budget during the 2013 session.
According to forecast documents, Minnesota’s budget outlook has changed little since August’s special legislative session when a $1.079 billion shortfall was projected. Revenues now are forecast to be $35.793 billion, $68 million less than earlier estimates. The small decline in revenues is partially offset by a $43 million reduction in projected spending and a net $9 million increase in reserves.
Minnesota’s budget outlook for FY 2014-15 depends on more than the national economy’s strength. Changes in federal law also will affect state revenues by inducing changes in individual behavior. For example, permanent tax rate increases are generally expected to encourage acceleration of taxable income and reduce it in later years. The state’s forecast consultant, Global Insight, has an established baseline that assumes federal policymakers will resolve current fiscal cliff concerns on a timely basis and that significant tax and spending changes will be phased in beginning in 2014. Failure to reach agreement before January 1, 2013 tax year or a more aggressive fiscal policy stance in 2013 would materially reduce economic growth and state revenues in the 2014-15 biennium.
State officials say current conditions will allow the state to reduce the K-12 education shift by $1.3 billion of the $2.4 billion outstanding but that improvement does not continue into next budget period.