State finance officials released an economic update Thursday that they say confirms the state's bleak financial picture. An unofficial projection shows the state's budget deficit could top $3 billion in the next two-year budget cycle. Gov. Ventura says the candidates running for his job owe it to voters to spell out how they'll balance the budget.

	Gov. Jesse Ventura announced Thursday that the budget deficit for Minnesota is projected at more than $3 billion for 2004 and 2005. Listen to his remarks. (MPR Photo/Laura McCallum)

Quarterly updates of tax collections rarely get much much media coverage. This time, however, Gov. Ventura called a news conference to highlight the numbers.

Revenues are actually $43 million more than expected in the first quarter of the fiscal year. But state officials attribute the slight increase to estate taxes collected from one wealthy individual. The state's income, sales and corporate taxes were down for the quarter.

State economist Tom Stinson says the numbers confirm what finance officials have been saying for months.

"In February, we told you it was worse than we thought," Stinson says. "Two weeks ago, we told you that it was not getting any better, and this is just another confirmation of what we've seen."

Stinson says capital gains income and bonuses are down. Mortgage tax payments are up, because of a surge in refinancing, and motor vehicle sales tax collections are up because of auto rebates. It all adds up to a likelihood that the deficit will grow to more than $3 billion when the next official projection comes out in early December.

Gov. Ventura says the deficit is the number one problem facing the state. He says voters should demand that candidates for governor tell them how they'll plug the hole.

"I think that they're entitled to complete answers. If you're not going to raise any revenue or taxes, then they're entitled to know what will be cut," Ventura says.

The only candidate who has pledged not to raise taxes to balance the budget is Republican Tim Pawlenty. Pawlenty has not spelled out specific programs or services that will be cut. But he says he will transfer some state functions to the private sector, and shrink the growth of state government.

"We're going to not fill some positions, we're going to lay some people off," says Pawlenty. "We're going to reduce spending on certain programs, we might place certain programs on a one-year or longer moratorium, we may cut funding for certain programs -- so all of those approaches will be deployed when we have the specific budget forecast next February."

None of the other candidates have outlined specific cuts either. But the other candidates say tax increases are likely to balance the budget.

Earlier in the day, DFLer Roger Moe said he wants to increase funding for early childhood education and paid parental leave. During a stop at a Head Start Center in St. Paul, Moe proposed a voluntary paid parental leave program that could cost up to $8 million a year for the state. Moe says investing in Head Start and other programs makes economic sense.

"We really can't afford not to make that kind of investment, because I think the cost savings are enormous in the long run," Moe says. "I think that we can make that work within the difficulties that we have before us. I think we also qualified everything by saying, you can't do everything at once. But we're committed to making sure that children in this state are going to come first in this process."

Moe says he'll also try to jump-start the state's economy by creating jobs through public works projects.

Independence Party candidate Tim Penny blames both Moe and Pawlenty, as majority leaders of the Senate and House, for the budget problem. He says they used gimmicks and accounting shifts to solve the last deficit, which merely delayed the problem for the next Legislature.

Penny's campaign manager, Jack Uldrich, says if Penny were governor, he would call them back in special session to finish their work.

"Why put the onus on legislators -- particularly the 25 percent who are going to be new -- as well as the new governor, to deal with that problem?" says Uldrich. "They're already going to have to deal with this $2 billion to $3 billion problem. Let's just make the past legislators fix the mess that they created."

Uldrich says Penny will outline more budget specifics by the end of October.

Green Party candidate Ken Pentel has been the most specific of all of the candidates in outlining ways he'd balance the budget. Pentel says he would move to a more progressive income tax, create a pollution tax, tax commercial-industrial water use and enact taxes on luxury items. Pentel says the latest budget numbers simply confirm the magnitude of the looming deficit, which he thinks could grow even larger.

"Just let's take one example - chronic wasting disease. If we say that hunting is down 30 percent in the state of Minnesota, what does that mean for license fees? What does that mean for the ancillary economic activity that's associated with hunting in the state of Minnesota? You know, all these economic downfalls will play into the deficit coming up," he says.

Pentel says the next governor needs to carve out a budget deal with legislative leaders right away in the next session.