COVID-19 making state budget sick

It was widely assumed that the COVID-19 pandemic and the measures being taken to contain it would impact the state’s economy. Just how much was announced on Tuesday in the latest financial projection from the Minnesota Budget and Management office.

In its February projection, the office projected a state budget surplus of $1.5 billion at the end of the current budget biennium. On Tuesday, the forecast was for a deficit of $2.43 billion, a swing of nearly $4 billion.

How big is that deficit? It’s bigger that the state’s $2.3 billion fund reserve that has been built up over the years, the rainy day fund intended to help the state through lean times.

The difference is a result of the shutdowns and layoffs over the past couple months — people who aren’t working aren’t paying income taxes. People who aren’t shopping at businesses that aren’t open aren’t paying sales taxes. On top of that, state spending on emergency relief programs has risen, cutting into the surplus as well.

So, what should the state do to deal with this fiscal crisis?

There are plenty of “Don’ts” out there: Don’t use it as an excuse to raise taxes, according to American Experiment, and the GOP House Caucus. Don’t cut health care and education so that the wealthiest 1 percent won’t have to pay their fair share of taxes, according to a coalition of socially oriented organizations. Don’t cut Local Government Aid to balance the budget, according to the Coalition for Greater Minnesota Cities.

We’d like to offer a “Don’t” as well. Don’t consider anyone to be exempt from being part of the solution. We should all be sharing in the solution. We should continue supporting programs that help the poorest, the sickest and the hungriest among us, of course. We should approach cuts to education and LGA with caution, with appreciation for what impact those cuts would have on local property taxes. We should consider a mix of cuts in state spending and tax increases, while using a portion of the state’s budget reserve to soften the blow on all of us.

There is no single action that will solve a budget deficit of this size. We should all share in the solution.


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