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Gov. Dayton and GOP legislative leaders may be breathing a sigh of relief that a historic $5 billion projected budget deficit is behind them.  The only problem is that they may be facing another budget shortfall when the 2012 legislative session starts in January.  Management and Budget Commissioner Jim Schowalter said the dramatic stock sell off in the past week, concerns over an economic slowdown and high unemployment could all mean fewer tax dollars flowing into the state's treasury.

"Balancing the budget once, unfortunately, doesn't guarantee that it will be balanced for the entire biennium," Schowalter told MPR News.  "When big things like this happen, it will have ripple effects throughout our economy and that will affect our revenues and our spending."

Dayton and GOP legislative leaders ended a three-week state government shutdown by borrowing against future tobacco payments, delaying payments to K12 schools and cutting spending.  The plan was heavily criticized because it didn't address the state's long-term structural deficit through permanent spending cuts, tax increases or a mixture of both.  Schowalter said Dayton and the GOP-controlled Legislature may be forced to make another set of tough decisions if the state faces another budget deficit when the next revenue forecast is issued near the end of the year.

"Right now, we have a lot of uncertainty whether we're going to have a double dip recession and that means for the state of Minnesota and organizations generally, more uncertainty and more questions.  We're going to have to act quickly and responsibly and make sure we keep our financial affairs in really good order."

Minnesota is scheduled to borrow $700 million to help balance the current budget.  That money is leveraged by future payments from tobacco companies that the state receives from a settlement of a suit over smoking costs.  The state is also scheduled to borrow $500 million to fund public works projects.  Schowalter said S and P's decision to downgrade U.S. debt comes on top of two negative reports about Minnesota's credit rating.  Schowalter said the state would likely be forced to pay more for that borrowing.

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Tom Scheck

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Minnesota may be forced to deal with another budget deficit.

Out of the state fiscal frying pan but into the fire?

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