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State budget deficit grows, but local governments safe this month

ST. PAUL -- Minnesota cities and schools will not need to help plug a state budget gap this month, but the state faces a major budget deficit as lawmakers prepare to decide on spending and revenue for the next two years.

State finance officials today released a budget forecast showing a $6.2 billion deficit for the next two-year budget, up from a projected $5.8 billion. Even with that, Commissioner Steve Sviggum of Minnesota Management and Budget said there will be no need to cut spending, which means past local government aid cuts will not be repeated and there should be no need to borrow money.

The budget forecast sets the stage for the 2011 legislative session, which begins at noon Jan. 4. A new Republican majority in both the House and Senate must take the lead along with a new governor.

"Nothing earth-shaking," is how Rep. Morrie Lanning, R-Moorhead, characterized today's announcement.

While it is good news that local government funds will not be raided to balance the budget, Lanning added, problems remain as legislators deal with the coming budget. Especially bad are rising health-care costs, which Lanning said "eat up" natural revenue increases.

State finance officials said revenues are projected to fall nearly $1 billion in the next two years, lead by a $471 million personal income tax drop. At the same time, costs will rise $8.3 billion.

The added costs are due to not just more spending but also to replace $2.3 billion in federal funds that helped balance the current two-year budget.

Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.