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The Minnesota Department of Finance reported that general fund revenues up nearly 2 percent, or $58 million, above the previous forecast to $3.48 billion. Income taxes, corporate taxes and the motor vehicle sales taxes all exceed expectations, while gross sales taxes were low by $7.7 million at $1.05 billion.
Altogether, the state’s general fund revenue collections were about $450 million ahead of the previous forecast, which Finance Commissioner Tom Hanson said was a sign that Friday’s report was not all bad news.
“This extra money will provide a cushion as the economy begins to slow,” he said at a news conference.
The report covered only state revenues. The last budget forecast that covered both revenue and spending predicted a nearly $950 billion deficit for the 2-year budget that starts in July. That figure could easily rise when a new budget forecast is released Dec. 4.
Hanson said the lawmakers will find it difficult to fund new projects when they return to the Capitol in January. “We will be challenged to pay for the spending we are already doing,” he said. “Any new initiatives or new spending will probably have to be re-thought.”
The report said there is little doubt the U.S. economy is in a recession and the only question is how bad it will get and how long it will last. The state’s economic forecaster, Global Insight Inc., is predicting the national economy will decline through early next spring.
State Economist Tom Stinson said he did not expect job growth in the state to bounce back until at least this time next year. However, he downplayed the suggestion that the economic downtown would sink to the levels of the 1930s.
“This is likely to be a very serious recession, on the order of the recession of the 1980s,” Stinson said, “but this is not on the order of the Great Depression.”
The tightening credit markets are affecting the state in other ways, too. Assistant Finance Commissioner Kathy Kardell said the state has delayed a planned sale of $443 million in general obligation bonds, which would pay for a variety of projects, due to a shortage of buyers in the debt market.
She said the delay would not affect the work on those projects in the short term because the state already has $200 million in bond-sale proceeds to tap, and can loan itself money from other parts of the state budget if that runs out.
Kardell said the state has enough cash to operate and won’t need to go into the short-term debt markets, as California and Massachusetts have. Both of those states have had to ask the federal government for loans due to their inability to get funds in the short-term debt market.
“The state’s cash position is very solid,” Kardell said.
