Oct 10, 2008 6:58 pm US/Central
Ailing Economy Strains Charities, Social Programs
(WCCO)
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Friday, state financial experts explained the turbulence on Wall Street will likely ripple down to Minnesota, especially if bailout efforts fail.
CBS
When all of us are hurting from the economy, so is our state. Minnesota money experts shared both good and bad news during a state economic update.
The thousands of northwest metro families depending on a People Responding In Social Ministry (PRISM) food shelf don't need an economic report to know times are tough.
"Our families are just very stressed. They're already living on the edge and now that edge is getting closer," said Executive Director Elizabeth Johnson.
PRISM offers everything from emergency food, clothing, rent and mortgage assistance and cars to the working poor.
The nonprofit depends in part on state funding, but when Minnesotans lose money, their families will lose out.
"When those businesses, those foundations, when investments are down, then the ability to give out money goes down, so the economy just has this sort of ripple down effect across the board," said Johnson.
Friday, state financial experts explained the turbulence on Wall Street will likely ripple down to Minnesota, especially if bailout efforts fail.
"We could have a very severe economic downturn if these innovations don't work," warned Minnesota State Economist Tom Stinson.
Though the state took in more revenue than expected for the first half of this year, it's looking at a more than a $900 million deficit in the next biennial budget.
"The state's treasury might be hard-hit," said Christopher Phelan, University of Minnesota Economics Professor.
Phelan anticipates the state won't be getting what it's used to in capital gains revenue.
"There's not a lot of people selling stocks right now for more than they bought it for, so the state is not getting that 8 percent cut," he said.
Which means the state will have less money for programs and services.
"We will be challenged to pay for the spending (programs) we're already doing," said Commissioner Hanson.
The state has about a $450 million revenue cushion right now, but the anticipated deficit is more than twice that amount.
It doesn't help that sales tax revenue is also down.
(© MMIX, CBS Broadcasting Inc. All Rights Reserved.)
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