Minnesota’s legislature reconvenes in January. One of the first problems lawmakers are likely to face is a huge deficit, moving forward into the next budget biennium. The official economic forecast is due to be released on Thursday, but early indications are it will paint a less than rosy picture.

 

The state government will likely face a deficit of over $4 billion dollars. In 2008, legislators withdrew $500 million from the reserve fund to help close a $1 billion deficit, leaving only $153 million in reserve account. Borrowing covered the rest of the budget gap, but the bonding bill wasn’t limited to covering essentials. Another $500 million was also borrowed for additional capital project expenditures.

 

Speaker Kelliher has given a preview of her ideas to close the deficit, saying if it’s too large, it’s difficult to do it just by cuts. The unspoken phrase is tax increases.

 

The economic problems that have, in part, led to the budget shortfall are the same situations that are sensitive to tax hikes. Unemployment has reached 6% in Minnesota, and is likely to rise further in the near future. Corporate profits are declining, incomes aren’t growing, sales are down and investments are failing. Higher taxes can exacerbate all of these economic conditions.

 

The state’s Constitution requires a balanced budget each biennium. Faced with such a huge deficit, many legislators are likely to turn to tax increases as a way to cover the government’s budget shortfall. Bonding isn’t practical in our current economic situation. Speaker Kelliher continues to talk about additional “investing” in education and state infrastructure improvements, implying yet more proposals for new spending in the face of a whopping $4 billion deficit.

 

When many families face increased economic hardship, reduced income, investment losses, loss of home equity and cost of living inflation, state government looks likely to attempt increasing the taxpayer’s burden.

 

In the run-up to this year’s election, Governor Pawlenty, aware of a looming deficit (expected at the time to weigh in at around $2 billion), made several statements about the need for the state to live within its means, which may indicate a willingness to veto the tax increases that are likely to come across his desk in 2009.

 

Several candidates for the state’s House of Representatives also promised to put spending cuts ahead of tax increases by signing the Live Within Our Means Commitment. This commitment will soon be put to the test and there are many legislators who have not made this commitment to the taxpayer at all. It will be of supreme importance that Minnesota’s lawmakers hear from their constituents on the upcoming budget issues. Minnesota’s economy can’t afford higher taxes right now. It’s time to take a hard look at reversing the trend of bloated government spending.

Take Action: Click here to contact your representatives and remind them not to make matters worse with tax hikes when we can least afford them.