Minn. tax collections sink $150M under estimates

ST. PAUL, Minn. - Minnesota finished its last budget year with $150 million less in tax revenue than officials expected, mostly because of a poor performing income tax.

The dip is detailed in a quarterly economic update released Friday by the Minnesota Management and Budget agency. The shortfall won't produce immediate budget cuts thanks to federal stimulus dollars that arrived during fiscal year 2009, which ended June 30.

"It's not great news, but it's not horrible news. It could have been worse," said MMB Commissioner Tom Hanson.

It could still get worse, though. The report says the figures "could change materially" as people file amended tax returns to account for money they lost in Ponzi schemes. Some Minnesotans lost money in the fraud perpetrated by Bernard Madoff; others saw investments suffer in an alleged multibillion-dollar scheme by local businessman Tom Petters. Those losses could mean smaller tax payments to the state.

A final accounting of individual income taxes for last year is expected in October. As of now, they are $232 million below projections, which ate away at the stronger-than-anticipated collections from corporations and estate taxes.

The report's authors say they expect the economy to show growth in the fall, but they're expecting job losses to stretch into next spring.

"Even though Minnesota's subpar economic performance extended for just three years, there has been concern that the state's recent performance might be an early warning of longer term problems," the report said.

The economic update only looks at the revenue side of the ledger and doesn't reflect fluctuations in spending on government programs.

All told, Minnesota took in $14.8 billion in taxes and other revenue in fiscal year 2009.

Minnesota's budget picture is worse for the two-year cycle that began July 1. Gov. Tim Pawlenty is imposing $2.7 billion in cuts and accounting shifts to cope with a projected deficit of that size.

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