The state budget forecast was released today and it came out much as expected. Minnesota will face a $1.1 billion deficit for the next biennium. This is what was projected for the state based upon revenue projections during the 2012 legislative session.

The forecast also includes the statutory requirement to repay the school aid shift that was part of the budget compromise in 2011. The school pay-back amount ($2.4 billion) will be reduced by $1.3 billion, which means the legislature must come up with an additional $1.1 billion for schools.

Therefore, we will head into the 2013 legislative session with a projected $2.2 billion shortfall.

The forecast is further complicated by the fiscal cliff discussion in Washington which if not addressed forecasters predict will create a recession and fall in state revenues of more than 5 percent. However, the forecast assumes a timely solution from Congress and the President. We shall see.

The next budget forecast will be delivered to the legislature in early March and will be the final yardstick for budget negotiations. With Democrats in charge, we can expect a good deal of discussions about tax increases to address the budget shortfall. How all this will affect the creation of a state insurance exchange remains to be seen.

Here is a link to a one page summary of the budget forecast.

http://www.mmb.state.mn.us/doc/fu/12/flash-nov12.pdf