When the February Forecast is released on Tuesday morning, we hope that the news is good. Indications are that the deficit for the current biennium will not be any larger than the $1.2 billion that was predicted last November. And there are several reasons why the deficit may actually be smaller: the state’s revenue collections are slightly above expectations, growth in the national GDP is performing above expectations and we now know the state will receive an additional $81 million in federal dollars related to health care expenses.
But this potential good news should be considered with some caution.
Minnesota will still face a budget deficit for the current biennium, so policymakers will still have to make difficult decisions to bring the budget back into balance. Although the economy appears to have finally turned the corner, Minnesota families have yet to feel any relief. Unemployment in Minnesota is at 7.4 percent and high unemployment is expected to persist through at least the end of 2011.
Unfortunately, if policymakers solve the state’s budget deficit entirely through spending reductions, the first to be cut will likely be the very services that are supporting families struggling to get back on their feet. The Governor’s supplemental budget gives us an idea of the services that are vulnerable, including child care assistance, health care, services for the disabled, employment services, affordable housing and higher education. Cuts like these would make it more difficult for low-income families to get and keep jobs, make it more expensive for the average family to access higher education and make it more challenging for folks with disabilities to live independently.
So it is important that any deficit, large or small, should be solved using a balanced approach. Spending cuts are necessary, but we can minimize the impact on vulnerable families by raising revenues to pay for some of the deficit. A majority of states have decided to resolve their budget problems through a combination of spending cuts and revenue increases and Minnesota should follow their example.
-Christina Wessel
