Minnesota finance officials released the state’s updated economic forecast this week. The numbers show that the state’s current budget deficit is about $209 million less than it was in November. That’s mostly because of spending cuts initiated at the state level; revenue collections from income and corporate taxes still lag significantly.

While the short-term deficit is somewhat improved, the state’s long-term budget deficit predicted for 2012-2013 has grown substantially since November, to about $6.9 billion once inflation is considered.

Balancing the current, $1 billion shortfall remains the main goal of this legislative session. The Senate already is working on a bill that will cut spending significantly in most budget areas. Every budget division except for education and health care are preparing their budget proposals this week. The Senate plans to vote on the bill next week, which should solve a large portion of the $1 billion deficit.

While spending cuts certainly need to be part of the overall solution, this economic forecast reinforces the main problem behind Minnesota’s budget troubles: revenue. In November, we were told lower-than-expected income tax revenue — caused by the still-sluggish economy and high unemployment — was responsible for 70 percent of the shortfall. The state economist said that fact still holds true. Minnesota’s unemployment is high, which means revenue collections remain low, dragging down the state’s economic health.

The state economist also told us this week that a bonding bill could be part of a comprehensive solution to Minnesota’s jobs problems. The Senate and House passed a bipartisan bonding bill in February that takes advantage of extremely low interest rates and labor costs to employ an estimated 20,000 workers on building and improvement projects around the state.

The Governor hasn’t participated in public meetings to negotiate a compromise on this bill yet, and it’s important he does. The only way we’re going to dig ourselves out of this financial mess is by creating new jobs and reviving the economy. Besides a bonding bill, the Senate also is considering a wide variety of economic development initiatives, including tax incentives designed to spur investments in high-technology business start-ups that can create quality jobs in cutting-edge fields.

I have introduced one of the only bills that generates new revenue for the state in the long-term without raising taxes. It’s a Racino bill, which would raise as much as $125 million annually through the expansion of video-game wagering at Minnesota’s two existing racetracks:

Canterbury Park in Shakopee, and Running Aces Harness Park in Anoka.

The money would be dedicated to a Jobs, Family and Economic Development Fund, which would appropriate 20 percent of its total revenues to each of the following areas: Agriculture and rural development; Early childhood development and family education; Research and development of bioscience and medical technology businesses, opportunities and employment; Athletic, recreational and extracurricular facilities and programs and to stimulate capital improvements and employment; and General fund expenditures.

March is a very fluid month for the legislature. Many of these major bills and spending decisions will be finalized in the weeks ahead, so please don’t hesitate to contact me with any questions or if you would like updates.

You may reach me at sen.dan.sparks@senate.mn; 651-296-9248; or Room 317 State Capitol, St. Paul, MN 55155.