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State Representative Paul Anderson
100 Rev. Dr. Martin Luther King Jr. Blvd.
651-296-4317
For more information contact: House GOP Communications 651-296-5520
NEWS COLUMN
STATE BUDGET UPDATE: IT ISN'T PRETTY
Notes From the Capitol
By State Rep. Paul Anderson
As expected, the November state economic forecast released Dec. 2 didn’t contain much in the way of good news. Not only are we facing a multi-billion dollar shortfall looking ahead to the next two-year budget cycle, but the current biennium – even with the unallotment done by the Governor – comes up short to the tune of $1.2 billion.
The main reason for the dismal forecast is lower revenue figures than those used to plan the budget last February. About 70 percent of the projected deficit is due to lower income tax receipts, which is a direct result of high unemployment and wages that have been stagnant or even declined in the past few months. Money coming into the general fund for the current biennium, which covers the fiscal years 2010 and 2011, is forecast to be more than $1 billion (3.7 percent) less than figured earlier.
As mentioned here before, there is a delayed effect on government revenue during and after a recession. Even when employment begins to pick up again, which will probably be some time next year, tax and revenue collections coming into the state will lag behind, some say as much as 18 months. For now, the unemployment rate is expected to trend higher still and real wage growth will fall by 4.5 percent. It isn’t any better for small business owners as their income is forecast to drop by a similar amount.
The firm that does the economic forecast for the state is also calling for five quarters of wage declines, which is weaker than at any time in the post-WWII period. Real wages are not expected to exceed their previous high until mid-2011. And, employment is forecast to remain below its previous high in December of ’07 until sometime in the year 2013.
The reason employment figures are so critical to revenue forecasting is because wages are the largest source of state income tax revenue. So until we start creating more jobs and real wage growth, revenue will remain below projections. The coming session of the Legislature, starting in early February, certainly has its work cut out for it.
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Rep. Anderson encourages constituents to contact his new office with input regarding any state legislative issue. He can be reached on the web at www.house.mn/13A and via email at rep.paul.anderson@house.mn. To contact Anderson by phone, call (651) 296-4317. Mail can be sent to Rep. Paul Anderson, 239 State Office Building, 100 Rev. Dr. Martin Luther King Jr. Blvd., St. Paul, Minnesota 55155.
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