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Dec 10, 2008 5:59 pm US/Central
Minn. Budget Worsens As Cities Try To Avoid Cuts
ST. PAUL (AP) ―
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Stinson says more bad news about job losses wasn't fully factored into last week's economic forecast.
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Minnesota's budget picture got bleaker on Wednesday, even as dozens of mayors pleaded for the state aid payments they're banking on.
Last week, state finance officials projected a $5.27 billion deficit through June 2011, including a $426 million short-term gap. State economist Tom Stinson said Wednesday the near-term deficit will probably grow by $30 million to $70 million when the latest job losses and depressed consumer spending are factored in.
The recession also hit November tax collections harder than expected even a week ago. The Minnesota Management and Budget department said revenue fell $31 million short of projections as corporate income taxes, the sales tax and other revenue came in low.
The latest bad news arrived as legislative tax panels delved into the details of more than $340 million in city and county aid, one of the biggest available unspent items in the current budget. Gov. Tim Pawlenty and lawmakers are focusing on those payments as Minnesota faces its worst budget crisis in a generation.
Cities are predicting layoffs and cuts in policing and other basic services if they lose state aid they were promised by the end of the month. Local officials said they would be hard-pressed to balance their budgets without the payments, with just three weeks to go before the end of the 2008 budget year.
Some can drain reserves or cash flow accounts, but others don't have them.
"This could cost us our fire department," said Tom Meneely, a city councilor from Arco, a town of 100 near the South Dakota border.
"The money has already been spent," said Richfield Mayor Debbie Goettel, who said her Minneapolis suburb might cut 16 police officers if the state payment doesn't come.
Mayors and council members from dozens of communities urged state leaders to make good on payments due to go out on Dec. 26, saying they are willing to cut spending if given more lead time.
Senate and House tax committees spent hours on the issue, but the decision is likely to come down to Pawlenty. The Republican governor has said he plans to use his executive authority to hold back unspent state funds after notifying the Legislature and draining a $155 million rainy day fund.
As part of that process, the Legislative Advisory Commission meets Thursday to discuss the proposed cuts.
(© 2009 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed.)
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