Minnesota’s two-year budget springs a leak in latest forecast

(Reuters) – Minnesota’s biennial budget faces a deficit for the first time since 2013 as state revenue is expected to fall while expenditures climb, according to a forecast released on Tuesday.

State budget officials pegged the deficit at $188 million, while noting the addition of money to fund the Minnesota Legislature’s operations would widen the budget gap to $302 million.

Lawmakers are expected to take up funding for the House and Senate when the new legislative session begins on Feb. 20. Governor Mark Dayton in May vetoed the legislature’s appropriation in the fiscal 2018-19 budget in an effort to pressure lawmakers to revise tax measures that he said will harm the state’s financial stability.

The Republican-controlled legislature took the Democratic governor to court, contending the veto was unconstitutional. But the state supreme court last month sided with Dayton, noting the legislature has access to funding to keep operating until February.

Revenue for the $45 billion two-year budget is projected to fall $559 million from the previous forecast, while spending is expected to rise by $398 million. That results in the first deficit forecast since February 2013, according to Keith Hovis, spokesman for the state’s management and budget office.

Dayton said the gap was due to various factors, including tax cuts passed by the legislature and uncertainty over federal tax changes currently before the U.S. Congress.

“(The deficit is) readily correctable and I commit to doing so in the next legislative session,” he told reporters in the state capitol, adding that the state will not be tapping its $1.6 billion rainy day fund to balance the budget.

Minnesota’s fiscal biennium began on July 1. The state faces a larger gap of $586 million for its 2020-21 budget, according to the forecast.

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