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New budget deficit set at $1.2 billion

ST. PAUL -- Minnesota's current state budget will be $1.2 billion in deficit if lawmakers and Gov. Tim Pawlenty don't take action, state leaders are learning today.

ST. PAUL -- Minnesota's current state budget will be $1.2 billion in deficit if lawmakers and Gov. Tim Pawlenty don't take action, state leaders are learning today.

And the state faces a $5.4 billion deficit through 2013.

Pawlenty this summer cut $2.7 billion out of the two-year budget that began on July 1, leaving the state to spend $32 billion. The new projections mean the budget will have to be trimmed further or taxes raised, or a combination of the two.

The estimates set up a new battle between the Democratic-Farmer-Labor Party controlled Legislature and Republican Pawlenty when the next session begins on Feb. 4. Pawlenty refuses to raise taxes, something most Democrats say is part of the deficit solution. Going into today's budget report, both sides agreed that more program cuts may be needed to balance the budget, as the state constitution requires.

Pawlenty has said he expects the Legislature to take budget-balancing action next year, an indication that he will not make immediate unilateral cuts as he did during the summer.

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The major cause of the deficit is an economy that has been in the tank for months. Economists say that even if the recession is ending, it will take some time for state revenues to swing back to normal.

While today's budget report is important, the one that will get even more attention will come about a month after the 2010 legislative session begins. That will be the report lawmakers and Pawlenty use when they work on budget changes.

Reaction began even before the deficit number was released.

Former U.S. Sen. Mark Dayton, one of a crowd of Democratic governor candidates, said the deficit is proof the state is in crisis.

"Partly, it is caused by the national economic crisis, which President Obama inherited," Dayton said. "However, Minnesota's crisis is also the result of failed state policies."

Dayton calls for raising taxes on the richest 10 percent of the state's residents to help solve the problem.

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