Dill, Bakk see state budget forecast as good, bad news

The bad news is that budget deficit remains in the next two years.

Bakk said the forecast shows welcome progress for Minnesota’s economic recovery, but it still leaves the state with a $1.1 billion deficit to resolve.

“In the months ahead, it will be up to the Legislature and the governor to work together on a fair, balanced and responsible budget that puts our state on the path to economic prosperity,” said Bakk. “That starts by having an honest conversation with Minnesotans about what is important to them and how best to fund our schools, invest in our transportation system, protect our most vulnerable citizens, and provide economic opportunity that can grow the middle class.”

Dill outlined his concerns. “The recently released budget forecast reveals a $1.1 billion shortfall for the up and coming 2014-15 budget years beginning July 1, 2013,” said Dill. “A surplus of $1.3 billion now exists in the current budget year ending June 30, 2012.”

Fortunately for school districts, any surplus available this year and in future years is required by law to repay unpaid portions of what was borrowed from K-12 public schools last session to make ends meet, said Dill.

“While the short term news is good for schools, even after the $1.3 million repayment, the state still owes schools a balance of $1.1 billion to be paid with any future surpluses,” he said.

Bakk said the federal government’s financial problems gives the forecast a degree of uncertainty.

“The fiscal cliff debate at the federal level could have an enormous impact on our state’s fiscal outlook,” said Bakk. “No matter what happens in Washington, we remain committed to working toward budget solutions that will end Minnesota’s decade-long cycle of constant crisis management and bring our state long-term economic stability.”

Dill said the forecast confirms that cost savings and increased economic activity above amounts forecast have resulted in a surplus in the present budget years.

“That said there still needs to be an honest conversation by Minnesotans, looking ahead on how we must deal directly with the state’s continuous deficits and hopefully conclude that a balanced and fair approach to expenditures and taxation can be reached,” he said. “There will always be those who live on the fringe and claim foul, but time is of the essence and cool heads and solid decision making will lead to a better Minnesota and avoid constant fiscal crisis.”

Dill said a broad number of things, including closing corporate loopholes for off-shore operations and raising the income tax on the wealthy, must be considered, but none of those things alone will solve the issue in the long term. Instead, he said there must be a combination of those things as well as finding ways to raise revenue.

Bakk said tax reform is high on his list to accomplish long-term goals. He’s been meeting with the business community to find ways to increase revenue that will be healthy for the state. He said collecting taxes on Internet purchases and expanding the sales tax to additional items while reducing the tax rate must be considered.

Dill said the Office of Management and Budget warned that if the fiscal crisis in Washington is not resolved, Minnesota’s economy will be hit hard with the state’s unemployment figure estimated to rise to 7.1 percent.

“At the same time that Minnesota does its housekeeping, let’s hope that those in Washington can have that same honest conversations as we will have in Minnesota,” he said.

As leader of the incoming Senate majority, Bakk said hopes that all legislators from both sides of the aisle will recognize the budget challenges facing the state and join Democrats in working to build a better Minnesota.

A February, 2013 Minnesota Management and Budget revenue forecast will used by the Legislature to build the 2014-15 state budget.