State economic forecast is grim

A message from our MLA/MEMO legislative lobbyist Elaine Keefe:

The state economic forecast was released today, and it contained grim news.  A deficit of $373 million is projected.  The state is projecting decreased revenues from sales taxes and corporate income taxes.  The state economist cited the housing slump, the credit crisis, energy prices, and a weak employment market in Minnesota as the major factors.  Commissioner of Finance Tom Hanson called the deficit “very manageable,” noting that the state has a record high reserve fund and that most of the funds appropriated in the 2007 legislative session have not yet been spent, “giving us lots of options.”   The latter comment is ominous for libraries, as it seems to indicate that the Governor may recommend reducing spending increases that were passed in 2007 as a way to cover the deficit.  We may find ourselves working hard just to hang onto the funding increases we received in the 2007 session.  It will also make it much more difficult for legislators to increase aid to cities and counties and to increase the general education formula. 
The decrease in revenues also means that the 2008 bonding bill will have to be a bit smaller than had been expected.  This is because the state traditionally limits the amount it spends on debt service to 3% of revenues.  Previously, it was expected that the bonding bill would close to $1.1 billion.  Commissioner of Finance Tom Hanson said that the revised revenue estimate means that the maximum size of the bonding bill is now $965 million.  This will make the competition for funding in the bonding bill even greater. 
Elaine M. Keefe
Capitol Hill Associates
525 Park Street, Suite 310
St. Paul, MN 55103
fax 651-293-1709


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