Thursday, March 5, 2009

The temptation posed by Federal stimulus money for dealing with Minnesota's state budget deficit.

Our state's projected budget deficit over the next two years is projected to increase to $5.87 billion from the $4.8 billion previously forecast. Yet because the federal government will give the state $1.3 billion, everyone is assuming that we only have a $4.57 billion budget deficit.

The problem with this federal money is the temptation to spend it on new programs and even existing ones will only put off the day of reckoning until the next two year budget cycle. The $1.3 billion is one time money and after it's spent will leave an even larger hole in the state's budget which will need to be filled the next time around. Even before the $1.3 billion came on the scene, the state economic forecast for 2012-13 is already predicting a $5.13 billion budget deficit.

How so? Because we have a structural deficit in our spending which never gets addressed. It's just been put off until the next budget cycle. The $1.3 billion for federal government will likely mean that we won't address it now and mean the next budget cycle could be just as painful as this one.

No comments: