Feburary 13, 2009
Minnesota Budget Update: Deficit May Reach $7 Billion
Governor Tim Pawlenty speculated Wednesday that the state's projected deficit for the next biennium could reach $7 billion when the next budget forecast is released on March 3. This deficit would be equivalent to nearly 25% of the state's total budget and reflects a sharp rise from the $4.8 billion deficit projected in November. Minnesota is expected to post a 7.8% unemployment rate—the second highest in the region.
One factor that could allay some pain and create jobs is the massive federal stimulus package moving through Congress. Minnesota stands to gain $3 to $4 billion from the federal stimulus package and possibly more once competitive grants are included. The package will bring funding to nearly every part of the state budget including healthcare, roads, bridges, schools, and more.
More than a third of the stimulus legislation is devoted to tax cuts, and Minnesotans can expect to see up to $400 individually or $800 jointly in reduced tax liabilities. Jobless benefits would rise $100 a month and food stamp benefits would be increased 13 percent. House Speaker Margaret Anderson Kelliher (DFL-Minneapolis) said the state is in line to receive at least $40 million in education funds and at least $29 million for roads and bridges, with the provision that at least half the money must be allocated towards shovel-ready projects.
Jim Schowalter, state Budget Director, said Minnesota will get at least $2 billion that can help the state's general fund and another $1 billion for items outside the general fund. In addition, he said, the state can compete for some grants related to energy and other green-job funds.
Tom Hanson, the state's Commissioner of Management and Budget, said that Wednesday's agreement on the federal stimulus package was quick enough that Minnesota will be able to build the package into the March forecast,. Hanson said the Minnesota's economic climate has worsened since November's projection of a nearly $5 billion deficit.
Growing Concern for Minnesota Hospitals
Governor Pawlenty's budget cuts will make it hard for hospitals to survive in Minnesota's current economic climate, according to Minnesota Hospital Association's President Lawrence Massa, who testified on Tuesday at the House Health and Human Services Policy Committee. He stated, “Minnesota's hospitals are in a dismal financial situation.” He also noted that the net income for hospitals has fell from a positive 4.8 percent in the third quarter of 2007 to a negative 2.5 percent for the same quarter in 2008.
Governor Pawlenty's budget proposal could result in $691 million in cuts to state hospitals, which Massa argued would diminish patient care and reduce many services that have been historically provided to communities across the state for no revenue . Both rural and urban hospitals in Minnesota have been hurt by the current economic climate. In the last six months, hospitals in the state have laid off over 1,500 employees. The costs for uncompensated care, including charity care and bad debt, is growing exponentially—in the past six years, costs have risen from $237 million in 2002 to an estimated $601 million in 2008.
Pawlenty's proposals to solve a projected $7 billion deficit includes cutting $1.1 billion from public health insurance programs such as MinnesotaCare, which would leave 84,000 Minnesotans uninsured. Another part of the Pawlenty plan would shift $600 million for the biennium to the state's general fund from the Health Care Access Fund, which is supported by a 2 percent tax on health care providers.
Minnesota Greenhouse Gas Emissions Decrease
Reports presented to the Senate Committee on Energy, Utilities, Technology and Communications claimed that Greenhouse gas emissions declined approximately 1.2% from 2005 to 2006.
At the same hearing, the committee unanimously approved a bill introduced by Senator Yvonne Prettner Solon (DFL-Duluth) calling for an inventory of greenhouse gas emissions. The accounting of emissions from major industries and even businesses and apartment buildings would go further than measurements the state now takes and would provide a starting point for tracking the state's progress toward meeting mandatory greenhouse gas reduction goals by 2015.
David Thornton, Assistant Commissioner of the Minnesota Pollution Control Agency, said the reductions already recorded would leave the state on course toward meeting the goal, established by the Legislature in 2007, of an emissions reduction of 15 percent below 2005 levels by 2015.
He and Bill Glahn, Director of the Office of Energy Security, said the reductions may have resulted from utilities' moves into renewable energy and energy conservation programs. The measures recommended by Thornton and Glahn included the development of an infrastructure to support electric vehicles, the expansion of biofuels, the establishment of a regional or national cap-and-trade program, and lifting the ban on new nuclear power plants.
For up-to-date information about the Minnesota Legislature, tune into Almanac: At the Capitol. This lively and informative program is aired Wednesdays during the legislative session on Twin Cities Public Television at 7:00 PM on Channel 17 and at 10:00 PM on Channel 2.
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