State facing structural deficit of $6.2 billion. Time to reduce the size and scope of government.

The state is facing a projected budget deficit of $6.2 billion over the next two years. That's bad enough but an added problem is it's a structural deficit, meaning that even with strong economic growth, we're spending more than we're due to take in via tax receipts.

As Tom Stinson, the state's economist, said in a recent interview with Capitol Report, we're coming out of the worst recession since World War II, plus we're facing an ongoing structural deficit in our state finances.

This was the worst recession since World War II. We’re coming out of it, and everybody would like us to come out of it as quickly as possible, and we are coming out of it, but it’s going to take some time.

The good news, from the Minnesota point of view, is that we seem to be coming out of it faster than the national economy. But, to put it in perspective before we pat ourselves on the back too much, you’ve got to remember that California is part of the U.S. economy and the situation there is much worse than it is in Minnesota, so we better be doing better than the U.S. average....

We have a $6.2 billion structural shortfall. The revenue forecast for 2012-2013 went down by about $900 million [in November] because of some economic changes….

But I think the important thing to know is even if it went up twice - if we gained back that $900 million and then the economy improved enough so that we actually added another $900 million - we’d still have $4.4 billion worth of problem to deal with.

That means on an ongoing basis we're spending more than we have been taking in. The funding shifts and delay of payments used in the past to balance the budget aren't available. That means tough decisions about cutting spending and tax increases will have to be faced now.

I believe government is too big and needs to be cut back rather reverting to raising taxes. That will be very painful for those who have come to expect government to do more and more but in the long run expanding government isn't in the best interest of society or the family. Growing government has meant government taking over more and more family responsibilities which not only costs lots of money but also means people are becoming more dependent on the government for those services.

This dependency on the government hasn't improved the condition of the family, rather it's contributed to its decline. We can see government's ineffectualness by looking to results of anti-poverty programs. Despite spending trillions and trillions of dollars since the 1960s, poverty rates haven't decreased. Instead the health and well-being of the American family has declined dramatically. I believe the government has played a significant, though not the exclusive, role in that decline.

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.

Solve our state $5 billion budget deficit by raising taxes? That's $1,000 per man, woman and child.

Looking at and talking to people about our projected state $5 billion budget deficit will be an enormous challenge. The simple math says it would mean raising taxes $1,000 per man, woman and child to eliminate it for this biennium, 2009-10. And then it's projected to be another $4.6 billion for the 2011-12 biennium. Or about $900 per person all over again. For the average family would mean a tax increase of $4,000 per family or a 30% increase in the average family's state tax bill.

That's an enormous amount of money and shows how our state expenditures have gotten out of control. We were expecting a $950 million deficit even before the economy went into a deep recession and sent it to nearly $5 billion.

Of course, there's no talk of just raising taxes but from conversations with DFL legislators, there's an expectation there will or should be a tax increase.

I think that would be a mistake. For one, any tax increase will be passed along to individuals and families in one form or another; a bad idea during a recession. Second, government is doing far more than its capable of handling effectively. And third, we need to disabuse ourselves of the idea that government is the solution to all our societal problems. Currently, the thinking is -- there's a problem let's have government spend more money to solve it.

What needs to be done is change the way the state/government does business and scale back expectations. Government needs to do things differently and smarter. Instead of looking to government to solve social problems other institutions and groups in society need to step into the gap. That can and I believe will happen but not immediately because people have become conditioned to looking to government to do it.

That has to change and I believe will change whatever happens with our state budget deficit this session. That will be painful and difficult but necessary and in the long run in the best interest of Minnesotans.