Minnesota lawmakers braced themselves for an ugly budget forecast, fully expecting a projected deficit to swell and painfully aware that spending cuts will be unavoidable.
State finance officials will say Thursday how deep the budget hole is. By all indications, the deficit will exceed November's $373 million shortfall prediction for the budget cycle that runs through June 2009.
"The economy has deteriorated nationally and in Minnesota since the November forecast," Republican Gov. Tim Pawlenty said this week. "I think you will see the deficit for this biennium and the next one worsen significantly."
Like much of the nation, Minnesota's economy has taken a hit from the slumping housing market, higher energy prices and a struggling manufacturing sector.
The state Constitution requires a balanced budget by the end of the two-year budget cycle.
There are few options for getting there and with each month the task becomes more difficult. State leaders can slice into the $34.6 billion budget, raid $1 billion in reserve accounts, delay promised payments until the next budget cycle, raise taxes or some mix of all those.
But Pawlenty has taken the tax option off the table, and one leading lawmaker said it would be futile to fight him on it.
"The governor has been pretty firm he doesn't support a general tax increase. I take him at his word," said Senate Majority Leader Larry Pogemiller, DFL-Minneapolis. He said it's "unlikely" senators will propose one.
Legislative leaders say they'll wait to see Pawlenty's plan for the deficit before describing their own solution.
Earlier this month, Pawlenty imposed a hiring freeze for state government. He said that most government jobs that become vacant will go unfilled and senior staff must sign off on filling vital jobs.
Ahead of the forecast, few people at the Capitol offered concrete examples of possible spending cuts. They said the Legislature exhausted most of the obvious cuts when they confronted a $4.5 billion deficit in 2003.
Two areas consume roughly 70 percent of Minnesota's budget: K-12 education and government health care assistance programs.
"My back is up against the fire and the wolves are circling," said House K-12 Education Finance Chairwoman Mindy Greiling, DFL-Roseville. "The idea of K-12 once again being the cash cow to paying the deficit, I'm going to be fighting that tooth and nail."
(Copyright 2008 by The Associated Press. All Rights Reserved.)