Federal economic stimulus monies flowing to Minnesota may help out the current budget crisis, but it's only one-time money, says Sen. Mary Olson, DFL-Bemidji.
A state budget forecast revealed Tuesday that the state budget deficit for the next two-year state budget is predicted at $4.57 billion -- lower than the $4.83 billion predicted in the December forecast.
But that figure is helped by $1.82 billion in federal economic stimulus dollars -- otherwise the deficit would be $6.39 billion.
"Without that federal stimulus money, our deficit would have grown from that $4.8 billion to almost $6.4 billion," Olson told Beltrami County commissioners Tuesday in a telephone conference call. "The only reason that it hasn't grown to $6.4 billion is because we've been able to backfill with this federal money."
But that means in the 2012-13 biennium, a continuing deficit of $5.1 billion will be facing lawmakers -- plus another $1.36 billion if inflation is included.
"We have to have a long-term plan to address that as well," Olson said.
The Bemidji Democrat said that if lawmakers were to balance the current budget with somewhere more than 50 percent and short of 100 percent of the solution in spending cuts, across the board cuts of 6 percent would be needed. To solve the structural deficit, cuts across the board of 8 to 8½ percent.
"Everybody's going to get cuts," Olson said, including Local Government Aid to cities. "But the Senate position is goin gto be that the cuts in LGA is going to be less severe than what the governor is proposing, and we will try to make cuts in a more balanced fashion."
Olson said much of the input from recent community meetings, including Bemidji, called for not singling out groups for harsher treatment.
Senate Democrats are also looking at reforms to save money, not just cutting programs. "We know we're going to have to be cutting, but as we're looking at those out years, if this federal money can be a bridge to get there, that gives us a little time to put together some fairly broad-based and significant reform proposals that would look at different ways of delivering services, rather than just cutting the services."
Olson called it significant that the Legislature passed a bill last week and Gov. Tim Pawlenty this week signed into law a bill that requires the governor and Legislature to prepare a four-year balanced budget.
"We would have to have a budget proposal that balances out for four years," she said. School districts need more stability in knowing state revenues, and long-term budgeting is a more fiscally responsible way to budget.
"As we are planning on how to handle this budget deficit, we're going to be looking very closely not only at the immediate first two years but also what's going to happen to our budget in the tails," Olson said.
Rep. John Persell, DFL-Bemidji, noted in a statement that the federal stimulus funding is only one-time funding and that the national recession is continuing.
"While the one-time federal money is certainly welcomed and helps address our short-term needs, it cannot hide the fact that our recession is deepening and not expected to end anytime soon," said Persell. "We learned ... that we will continue to lose jobs and state revenue -- making the budgeting decisions we will make over the coming weeks even more difficult."
Minnesota has already lost 50,000 jobs and is projected to lose another 70,000 by the end of the year, he said. Without the federal stimulus money, another 45,000 jobs would be lost.
"It will be important that we keep in mind the values that have made our state great, cut where we can, reform programs that aren't effective, and increase funding where we must. Every option is on the table," Persell said.
"Minnesota families are feeling the pain of our economic downturn daily," he said. "They are losing jobs, homes, their retirement funds, and the opportunity to send their kids to college. We need to keep all of this in mind as we work to protect the Minnesota way of life and restore long-term economic stability to our state."
Rep. Brita Sailer, DFL-Park Rapids, in a separate statement, also noted the slipping economy and massive job losses, up to 120,000 more into 2010.
"Thanks to the federal stimulus money we can offset some of those losses - in fact, State Economist Tom Stinson says the stimulus will actually add or save 45,000 jobs," Sailer said.
"But the truth is, as much as we appreciate the cushion the federal money provides we're not anywhere close to being off the hook. We need to make hard choices and keep every option on the table if we're going to get Minnesota on a path to economic recovery and long-term financial stability," she said.