State agencies directed to brace for deficit

Back in November, we learned that the state is now expecting a $373 million deficit for the current biennium. In response, the Minnesota Department of Finance issued a memo in January directing all state agencies to submit proposals that would cut their general fund budget by 3% for FY 2009. The memo directs that these cuts should be permanent, and should look at “rolling back increased spending” in state grant programs.

The latest Economic Update, released by the Dept. of Finance last month, does not offer much good news either. Although revenues are ahead of forecast projections, the increase may be because of timing, rather than a stronger economy. Instead, the Update warns that “policymakers are in largely uncharted territory” as they try to prevent a slowdown from turning into a recession.

Clearly, policymakers face a challenge as they begin the 2008 Legislative Session. But we would remind them of the principles for good fiscal policy we laid out last time Minnesota faced a recession: the most important being that we should not respond with decisions that make the recession worse for those Minnesotans least able to weather the downturn.

-Christina Wessel

About Christina Wessel

Christina served as the Minnesota Budget Project's deputy director until January 2014.
This entry was posted in Budget Process and tagged , , , . Bookmark the permalink.

Leave a Reply