Column: Solving Minnesota’s $2 billion problem

Published 12:00 am Saturday, December 8, 2001

This week the Department of Finance confirmed what Minnesota’s lawmakers, business owners and family budgeteers have nervously suspected for months: Minnesota is in a recession, and as a result, state coffers are on track to come up $1.

Saturday, December 08, 2001

This week the Department of Finance confirmed what Minnesota’s lawmakers, business owners and family budgeteers have nervously suspected for months: Minnesota is in a recession, and as a result, state coffers are on track to come up $1.953 billion short by the end of this two-year budget cycle.

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According to state economists, much surrounding this recession remains uncertain. While economies across the U.S. began dragging early this year, no one could have predicted the catastrophic effects of the Sept. 11 terrorist attacks. These unusual circumstances helped push 45 states into recession, and left them without any similar historic advice on how long this downturn might last, or how bleak the situation might get.

While the forecast is troubling, there is good news. Inflation is under control, and consumers are continuing to spend money. Part of this good fortune is due to the federal and state rebate checks and property tax cuts the legislature passed this year. This additional infusion of cash helped keep our local economy moving; if that revenue had not been on hand, things would undoubtedly be worse. Those families who have already spent their checks have helped stimulate our economy. Those who chose to save their rebate will have a ready source of revenue available to help revive the economy once consumer confidence rebounds.

At the state level, we will have to take substantial steps to correct our economic problems, specifically the nearly $2 billion shortfall. As any household manager knows, on the surface the answer is simple -&160;consume savings accounts, raise income (i.e. taxes), or decrease spending. The first, and perhaps least painful, option would be to spend down the state’s &uot;Rainy Day&uot; account. In this respect, Minnesota is much better equipped to handle this economic downturn than we have been in the past. In 1991, we faced a similar recession without the benefit of a savings account. Today, the state can depend, to some extent, on reserve accounts the legislature boosted this session to over $1.175 billion.

Second, the state could choose to cut spending. Responsible budgeting in a time like this depends on making sacrifices. Obviously certain priority areas, like schools, transportation and nursing homes, have little excess meat on their bones. We will make every effort to pare back spending in our budget without disrupting vital services like these.

The third and least desirable option is raising taxes. The last thing our families, who are facing their own financial challenges, need is an increased tax burden. I will do everything possible to avoid this solution.

The 2002 session convenes on Jan. 29. From the moment our first floor session begins, I will be pushing lawmakers to address our economic woes before they magnify. Until that time, I will be investigating solutions of my own, and I encourage citizens to play a role in that process. Please contact me with questions, advice, or opinions on which area of the budget you’d prefer to cut or protect. We have all enjoyed the past ten years of economic good fortune, but I know we have the wherewithal to pull together now, with cooperation and sacrifice to weather this storm, and build a future that is stronger than ever.

Please feel free to contact me by mail at 151 State Office Building, 100 Constitution Avenue, St. Paul, MN 55155; by phone at (651) 296-9248, or by e-mail at sen.grace.schwab@ senate.leg.state.mn.us.