Minn. projects $1.1 billion budget deficit

6:02 PM, Dec 5, 2012   |    comments
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ST. PAUL, Minn. - Minnesota budget officials say the state's economy would be hit hard if President Obama and Congress can't strike a federal debt deal to avoid the so-called fiscal cliff.

The warnings from officials at Minnesota Management and Budget came Wednesday as they announced their economic forecast. The agency says Gov. Mark Dayton and state lawmakers face a projected $1.1 billion budget deficit next year, the smallest in some time.

But State Economist Tom Stinson says that would get considerably worse under a fiscal cliff scenario in which federal spending cuts and higher income taxes take effect. He predicts the state would shed 115,000 jobs in 2013-14, and personal income would drop more than 4 percent by 2015. He also says state tax revenue would drop by hundreds of millions of dollars.

Minnesota comes under full Democratic control next year for the first time since 1991, giving Democrats latitude to raise taxes after years of Republican resistance.

Labor leaders decried the forecast, calling for a new tax structure that would force wealthier Minnesotans to pay more.

"It's clear that the 'no new taxes' ideology of protecting the super-rich and big corporations at the expense of middle class Minnesotans has failed," AFL-CIO President Shar Knutson said in a written statement. "If we want to continue to have strong schools, a 21st century transportation infrastructure, create family-sustaining jobs, and care for those unable to care for themselves, Minnesota will need a significant influx of new tax revenue."



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