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State Representative Michael Beard
100 Rev. Dr. Martin Luther King Jr. Blvd.
651-296-8872
For more information contact: Jodi Boyne 651-296-0640
NEWS RELEASE
BUDGET FORECAST SHOWS DEFICIT DESPITE REVENUE INCREASE
ST. PAUL - State economists released their 2006-2007 state budget forecast Wednesday and while they project a deficit of $700 million, State Representative Mike Beard, R-Shakopee, sees some good news in the announcement.
"Compared to what we dealt with in my first term, this deficit is relatively small, and it shows the significant progress we've made in only two years," Rep. Beard said.
Economists from the Minnesota Department of Finance said that while revenues are expected to grow by $805 million over the next two years, state spending will increase by more than $2 billion. Higher spending is due mostly to a dramatic $1.4 billion projected increase in health and human services spending, a 20% increase that Rep. Beard says "simply cannot continue".
"We would have to double income taxes every eight years to maintain that rate of increase in spending growth. That's not realistic governing," Rep. Beard said.
Representative Beard also sees good news in the current budget cycle. For the year ending June 30, 2005, economists expect a $495 million budget surplus. By law, any budget surplus must first be used to increase the state budget reserve and increase the state's cash flow account, which will use about $377 million of the surplus. The remaining $118 million will be used to pay off education shifts used to balance the budget in 2002 and 2003.
"Solidifying our finances shows the bonding houses in New York that we are taking the necessary steps to fix the long term problems we face," Rep. Beard said.
One possible solution to the deficit is money generated through casino gaming, either from existing tribal casinos, a "racino" at Canterbury Park in Shakopee or a new privately-owned casino. The House passed a bill to create the Canterbury Park Racino in 2003 and the estimated revenue from casino gaming could be as much as $300 million.
While it is too soon to rule out any solution, Rep. Beard said the chances of an income or sales tax increase seems remote and the increase should only be increased after all other options are exhausted and careful consideration is given to the effects on consumers and businesses.
"We shouldn't rule out anything, but we need to look carefully at what a tax increase would do to the economic recovery we are seeing," Rep. Beard said. "Besides, a temporary tax increase does not fix the underlying problem that automatic budget growth is out of control and is not sustainable under any reasonable financial scenario".
What is needed, Rep Beard said is cooperation among both parties in the House and the Senate, working with the governor to find the right solution.
"I look forward to working with my colleagues in both parties to make sure we get our job done and avoid the kind of breakdown we saw last session," Rep. Beard said.
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