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Minnesota budget forecast shows slight dip

The Minnesota state Capitrol building as seen in July 2017, after completion of a $310 million, multi-year renovation. The original construction was completed in 1905. Don Davis / Forum News Service

ST. PAUL — Minnesota leaders may have a bit less to spend next year than expected, but there are too many uncertainties to know for sure.

Minnesota Management and Budget officials announced Tuesday, Dec. 5, that the state budget is expected to be $188 million short of predictions, which could grow to a $585 million deficit in 2020-2021 if state leaders do nothing.

The current budget deficit is minor compared to some years and compared to the two-year budget that spends more than $40 billion.

Tuesday's report indicated that economists predict a slower economy ahead. Also, the lower forecast includes laws that came out of the 2017 state Legislature, but finance officials would not discuss until later the specifics of how new laws would affect the state budget.

At the end of February, state finance leaders announced the state had about $1.7 billion more than expected, which set off debate, with Republicans wanting big tax cuts and Democrats calling for added spending in areas like education. In the end, the Republican-controlled Legislature and Democratic Gov. Mark Dayton approved a two-year budget with some of each.

Tuesday's budget report, however, is less important than the one earlier in the year for several reasons:

• Since the two-year budget already passed, and just began on July 1, only tweaks are expected in the legislative session that begins Feb. 20.

• The federal tax plan Congress is debating could have a major impact on the country's economy, and thus could affect how much tax Minnesota collects.

• The overall economy is strong, but there are people who continue to struggle. If more Minnesotans need state aid, such as health care, that could increase state spending and put a larger strain on the budget.

• State finance leaders said the country's economy is strong, exhibiting one of the longest expansions in history, but economists fear that expansion will not continue.

Another budget forecast is planned for shortly after legislators arrive for their 2018 session, so Dayton says he will not release any budget change requests until then. That forecast is expected to come at a time when federal government changes are better known than now.

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.