Minnesota state government faces growing budget deficit -- opportunity to change the way it does business or kick the can down the street.

The Minnesota state government is facing a growing budget deficit even in the current biennium which is only a quarter over. It ends June 30, 2011.

State officials are now projecting another $1.2 billion deficit which have to be dealt with in the next year and half. However, there's an even bigger storm cloud on the horiz0n. A $5.2 billion deficit is being forecast for 2012-13, the following biennium.

The answer? Pawlenty will no doubt resolve it through spending cuts while House Speaker Anderson-Kelliher, who's now running for governor, wants cuts and tax increases. According to the Star Tribune,

Speaker of the House Margaret Anderson Kelliher said the state must take a more holistic approach to restoring the state's financial health. She favors blending spending cuts and with revenue increases, but also wants to ensure the state is doing all it can to spur job growth.

"It's important to have balance in the way we solve these deficits," she said before the release of the forecast.

Like other Democrats, she criticized the governor's refusal to raise taxes, instead relying on deep cuts and one-time accounting maneuvers.

"Quick fixes and band aids are not doing it," she said.

Perhaps House Finance Committee Chairman Lyndon Carlson, DFL-Crystal, captured the outlook best: "All expectations are that this will be a very difficult biennium."

Pawlenty will no doubt accept no tax increases especially as he considers a run for president, and I'm sure Democrats realize that although. They'll push for tax increases to send a message to their constituencies that it's not "our fault we're having to cut more than we want".

I think we've simply postponed making the necessary structural reductions in the size of government. Pawlenty's probably done as much as he could to address the size of government, given his narrow veto proof minority in the House. He's kept tax increases at bay but he hasn't been able to force deeper structural changes in the way government does business. The result is deficits keep coming back and the way and what government does hasn't changed. The result is another enormous deficit looming on the horizon, a year and a half away.

Frankly, I see the deficits as an opportunity to change how the government does business. Voucherize government programs and empower local governments to take more responsibility. Unfortunately, nobody who receives government monies wants any of that. As a result, the problem keeps getting kicked down the street.

The 2010 elections will be enormously significant. If Democrats keep control of both the state House and Senate and gain control of the governorship we will start seeing enormous tax increases in 2011. In the multiple billions of dollars. That would no doubt further harm any economic recovery which is critical for the return of jobs. It will be interesting to see whether Minnesotans will have similar concerns and vote accordingly when they go to the polls in 2010.