The February budget forecast shows a projected budget deficit of $627 million for fiscal years 2014-15. This is an improvement of $463 million from the November budget forecast that showed a projected deficit of $1.1 billion.
The new forecast is a positive sign that Minnesota's economy is experiencing a fragile recovery. The state seems to be heading in the right direction. However, the improved forecast number does not change the fact there remains a significant budget deficit of $627 million in Minnesota.
Most of the savings come from improved job and economic growth. In fact, by the end of the year Minnesota will be back to pre-recession levels in job creation; the rest of the country won't get there until nine months later.
For too long our structural budget challenges have been ignored or swept under the rug with budget gimmicks and borrowing. With this forecast, we will make major progress by paying back $290 million owed to the schools. However, we still owe schools $800 million.
It's vitally important the legislature make responsible budget decisions to ensure we don't disrupt this positive economic progress and that we keep Minnesota on the right track. Using a sensible balance of spending cuts, responsible new revenue and targeted government reforms is the combination needed to solve the deficit and support continued economic recovery. State Economist Tom Stinson, who has served under Republican and Democrat administrations, confirmed that a balanced approach – one that uses some spending cuts and new revenue is the best budget solution for Minnesota.
Since Minnesota began running budget deficits in 2002, the solutions to those deficits have relied heavily on spending reductions and temporary solutions, but very little on tax increases. In fact, during this period spending cuts have been used at nearly five times the rate as tax increases.
After more than a decade of budget cuts, a fair and stable budget must include both cuts and new revenue to erase our budget deficit. Making up this deficit will allow us to make key investments in Minnesotans' shared priorities such as schools, colleges and universities, nursing homes, our rural transportation system, and property tax relief for farms, businesses and homeowners.
In the coming weeks it is vitally important that legislators roll up their sleeves and find compromise on a fair and honest budget solution that will end our cycle of budget deficits and set Minnesota on the path to continued fiscal stability.