Downturn

As the effects of stock declines and collapsing credit markets filter down into the everyday economy, state policymakers will have to contend with grim fiscal outlooks. In tight times, more people depend on government services like food assistance, Medicaid, and subsidized housing. But as the need for services increases, a state’s revenue collections are on the decline because of a shrinking tax base. Minnesota’s next budget forecast is due to be released in a few weeks and it’s likely to show a significant deficit of at least a couple billion dollars.

My colleagues and I are not looking forward to the upcoming legislative session, when lawmakers will be required to come up with a balanced budget for the next two years. Other states will be in similar predicaments. California just passed a budget that was over two months late and will probably need to be renegotiated to take into account a worsening economy. I don’t think things will get that dire here. At least, I hope not.