Minnesotans along with Gov. Tim Pawlenty got some good news Thursday as the state announced a $399 million surplus for this fiscal year.
This is good news for Minnesotans because there will be no need for any short-term borrowing or budget unallotments in the remainder of 2010. It is good news for Pawlenty as he can claim he ended his administration with a budget surplus.
However, remember the economic picture is not as rosy in 2011.
Thursday's report estimated the state budget deficit over $6.18 billion as state revenues are still projected to fall far short of projected spending. In addition, the deficit estimate does not consider inflation at all.
The good news in the state report Thursday is that Minnesota's economy remains strong and is expected to stay strong, according to state economist Tom Stinson. However, it is expected to take another two years before Minnesota gets back to pre-recession employment levels.
The bad news for the next governor and the Republican-led Legislature in 2011 is they will have to solve the $6.18 billion projected deficit, one way or another.
This will not be a small chore.
Minnesota will get $2.3 billion in federal government stimulus funding as it did in 2010.
The state still owes $1.9 billion in K-12 education payments shifted into the fiscal year 2012-13 biennium.
Years of budget deficits over the past two decades have hammered the state's finances. The state has repeatedly utilized resources and/or shifted money between accounts and/or years to help balance the budget, thus pushing tough decisions down the road.
This budget battle has not even started and one bond service says Minnesota's financial situation may be worse than projected.
Minnesota needs to make the necessary decisions to stabilize its budget, start rebuilding its reserves and maintain its strategic investment in this state.
While that is a worthy goal, this objective will not be accomplished easily or without some pain.