State’s $188M budget deficit is filled with questions

ST. PAUL (AP) — Minnesota may face a $188 million budget deficit next year but that shortfall could grow, shrink or dissolve entirely when lawmakers return to the Capitol in February, according to an economic forecast released Tuesday.

State officials blamed slowing economic growth nationwide and spending increases and tax cuts in the Legislature’s new two-year budget for the expected deficit, which would be Minnesota’s first in more than four years. But with an economic update expected in early March, Gov. Mark Dayton and lawmakers appeared content to wait before plotting a solution.

Much of the final size of any deficit — or surplus — would hinge on the federal government.

The state’s economic consultants assumed Congress would not pass a tax bill in the coming year, though the U.S. Senate recently passed $1.5 billion in tax breaks that could provide an economic jolt and unleash some unexpected tax revenue for the state. And the forecast left Minnesota on the hook for $178 million in funding for the Children’s Health Insurance Program (CHIP), at least until Congress reauthorizes and pays for the program.

While both actions could shrink Minnesota’s budget gap, it could also grow larger. The forecast doesn’t factor in nearly $120 million in operating funding for the Minnesota House and Senate, which Dayton vetoed this spring but vowed he’d approve next year after an ugly a protracted legal battle with top Republicans throughout the summer and fall.