Legislators were granted a slight reprieve as the February forecast, which was released today, showed a projected deficit of $4.57 billion for FY 2010-2011—about $2 billion less than anticipated. The recent infusion of federal assistance helped pare down the state's increasing budget deficit and erased the deficit completely for the remainder of 2009. Minnesota is now expected to end the 2008-09 biennium with a positive balance of $236 million and a $350 million cash flow account. The state received approximately $1.3 billion in federal assistance before the forecast release and is set to receive anywhere from $4 to $9 billion for various federally funded programs.

While this certainly comes as welcome news for some, Tom Hanson, Minnesota Management and Budget Commissioner, stated that the "federal stimulus has helped cushion the blow of a deteriorating economy. Nonetheless, this is very sobering economic news." Minnesota's economy is still lagging behind the rest of the country. The state unemployment rate has risen to 7.6%, increasing the number of people relying on unemployment and health care benefits from the state. Forecasters are expecting a longer and deeper recession than was predicted in November with significant job growth not expected to come until 2010. In addition, the federal funds are largely onetime funds only. In fiscal year 2012-13 "revenues are expected to be $5.133 billion less than projected expenditures before adjusting for inflation."

Gov. Tim Pawlenty is expected to release a revised budget proposal by the middle of the month, and legislators will spend the next two months trying to balance the budget and understand what the federal stimulus package means for Minnesota. With a statutory adjournment date of May 19, there is still a lot to be done.

For more information on the forecast, go to http://www.startribune.com/politics/state/40640392.html?elr=KArksLckD8EQDUoaEyqyP4O:DW3ckUiD3aPc:_Yyc:aUac8HEaDiaMDCinchO7DU.

You can also read the Minnesota Management and Budget report on http://www.mmb.state.mn.us/.

For Gov. Pawlenty's press release in connection with the February forecast, go to http://www.governor.state.mn.us/mediacenter/pressreleases/PROD009381.html.