Last month, Minnesota got bad budget news. It wasn’t a surprise — but it was still hard to hear. We are facing a $1.2 billion deficit for the 2010-2011 budget cycle, on top of $5.4 billion we already knew we’d be facing in 2012 and 2013. Seventy percent of the 2010-2011 figure is due to lower-than-expected income tax receipts. This means that in the upcoming legislative session, Gov. Pawlenty and DFL lawmakers will face stark choices in balancing the state’s budget.

As we reflect on the past decade, two less-than-stellar facts stare back at us. One: Minnesota has lost jobs. Two: state government has become less efficient, even as our governor has tried to shame local-government leaders, who have made drastic cuts, into “living within their means.”

It’s a concept worth thinking about — “living within our means.” It’s particularly interesting given that we also frequently hear from far-right conservative leaders — including those Republicans seeking the governor’s job this year — that government should be run more like a business.

No visionary businessperson looks at their work as a zero-sum game. They seek to create new markets and new customers in order to expand their business’s potential over time, not merely duke it out with competitors for finite dollars in a finite market. They seek, as former venture capitalist Andy Rachleff said, to grow the pie, not just their slice.

We cannot simply tax our way out of our deficit nor cut our way out of it; we must grow our way out of it. To solve our state’s budget problems, we need to grow the pie in Minnesota — in other words, grow our state’s economy and grow opportunity for all Minnesotans. It’s time to stop staggering from budget deficit to budget deficit and start looking at how to grow our economy so that we once again enjoy surpluses.

According to State Economist Tom Stinson, Minnesota faces a long-term structural deficit, resulting primarily from slowing revenue growth that is in turn the result of our aging population and high unemployment. It’s simple, really: When fewer people are working, fewer people are paying taxes. This means less money in the state’s coffers to fund things we all count on: road repairs, snow plowing, public schools, fire services.

I believe Minnesota can become a leader in the new clean energy economy. This has been my mantra for the past 11 months as I have spent time in communities all over the state. We should be manufacturing and installing thousands of new wind turbines. We should be leading the development of next generation ethanol and biomass. We should be installing super-efficient geothermal heating and cooling systems in public buildings. We should be harnessing the sun.

(It surprises some, but even with our dark and chilly winters, Minnesota is still one of the top 10 states in the nation for solar energy.)

We should be embarking on weatherization efforts that will not only create thousands of jobs but also save us untold sums on energy costs. These initiatives will create jobs and economic opportunity in every corner of Minnesota.

This is not about creating state subsidies. This is about harnessing our economic power. Every month when we pay our heating, cooling or electric bills, hundreds of millions of dollars leave the state. We pay for Middle East oil, Texas natural gas and Montana coal. We should follow the rule of all strong businesses and pay ourselves first.

Minnesotans are not clamoring for less health care or poorer schools — what they want is a vision of a state that works and a path to making that vision a reality. Unfortunately, while experts agree that we cannot simply make cuts nor raise taxes enough to solve our state’s budget problems, our current leadership has a history of rejecting sound advice in favor of sound-byte “solutions” and far-right ideology — and appears poised to do the same this time around.

Wages have declined for three quarters. Employment has fallen more than forecast. And state and local governments take a smaller portion of Minnesotans’ income now than at any time in the last 15 years. We’re fighting for a smaller piece of a shrinking pie.

We’ve just entered a new year. Let’s resolve that this year, we’re going to dedicate ourselves to truly solving our budget problems by baking a pie big enough so that all Minnesotans can have some.

Matt Entenza is the former DFL House leader and is a candidate for governor.