Posted at: 12/05/2012 10:01 AM
Updated at: 12/05/2012 5:26 PM
ST. PAUL, Minn. (AP) - Minnesota faces a budget shortfall of $1.1 billion for the next two years as Democrats prepare to take over the Legislature next month.
State finance officials released an updated forecast on Wednesday, as Democratic Gov. Mark Dayton shapes a two-year budget proposal. Despite the overall deficit forecast, they said the state would be able to repay $1.3 billion in delayed school aid.
Budget officials say the state's economy would be hit hard if President Obama and Congress can't strike a federal debt deal to avoid the so-called fiscal cliff.
State Economist Tom Stinson says the $1.1 shortfall would get considerably worse under a fiscal cliff scenario in which federal spending cuts and higher income taxes take effect. He predicts the state would shed 115,000 jobs in 2013-14, and personal income would drop more than 4 percent by 2015. He also says state tax revenue would drop by hundreds of millions of dollars.
Dayton: don't be surprised if I try to tax wealthy
Gov. Mark Dayton says it's "very likely" he will push again for higher state income taxes on the state's wealthiest residents next year.
Democrats say erasing the shortfall will require spending reductions and new state revenue. New DFL legislative leaders are reluctant to talk tax hikes, but say they also want to give relief to state property taxpayers and spend more state money on public education.
Dayton isn't releasing a full budget proposal until mid-January and wouldn't get into specifics. But he says he still believes as he did when he ran for governor in 2010 that Minnesota's wealthiest 2 percent of residents can afford to pay more in taxes.
Minnesota comes under full Democratic control next year for the first time since 1991, giving Democrats latitude to raise taxes after years of Republican resistance.
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