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Budget battle begins

Published (2/18/2010)
By Nick Busse
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Gov. Tim Pawlenty releases his supplemental budget proposal at a Feb. 15 news conference. (Photo by Tom Olmscheid)If the conflict over how to solve the state’s projected $1.2 billion deficit amounts to a kind of political chess match, Gov. Tim Pawlenty just made the first move — but DFL leaders say he’s cheating.

On Feb. 15, Pawlenty outlined his vision for a biennial budget fix. The governor’s supplemental budget proposal calls for deep cuts to some state programs, a package of tax cuts for businesses and some help from the federal government.

“Minnesota has experienced a multi-billion dollar drop in revenues as a result of the economy,” Pawlenty said at a press conference. “Spending expectations and requirements need to be aligned with the revenue that’s currently available.”

Under the plan, K-12 education, public safety and veterans services would be largely spared from the governor’s budget ax. Instead, Pawlenty calls for cuts in four key areas:

• $347 million to health and human services programs;

• $250 million to county and city aid;

• $181 million to state agencies; and

• $47 million to higher education.

Pawlenty’s plan also calls for a 20 percent corporate tax cut, a 20 percent reduction in small business taxes and several other tax incentives designed to encourage economic growth.

The final part of the governor’s plan — the part that has rankled members of the House’s DFL majority — is a plan to accept $387 million in expanded federal funding for Medicaid. The problem, Democrats say, is that the funding hasn’t actually been approved yet by Congress.

“At any time in history, has any other governor proposed a budget that relies on hypothetical federal funding?” asked Rep. Thomas Huntley (DFL-Duluth).

Prior to a Feb. 16 hearing of the LCPFP Subcommittee on a Balanced Budget, House Finance Committee Chairman Rep. Lyndon Carlson, Sr., center, listens as he and Senate Majority Leader Larry Pogemiller, right, question Minnesota Management & Budget Commissioner Tom Hanson on the use of federal funds to balance Gov. Tim Pawlenty’s supplemental budget proposal. (Photo by Tom Olmscheid) At a joint meeting of the House Finance and Ways and Means committees Feb. 16, Huntley and other DFLers vented their frustrations with the governor’s budget plan to senior Minnesota Management & Budget staff.

Rep. Lyndon Carlson, Sr. (DFL-Crystal), finance committee chairman, asked MMB Commissioner Tom Hanson what the governor would do if the federal Medicaid extension doesn’t become law.

“What we’re really interested in … is what I called this morning ‘Plan B’ — what you would do if the $387 (million) is not there,” Carlson said.

Hanson replied that there is no “Plan B.” If the Medicaid extension falls through, the governor will propose additional cuts — but there are no plans currently to specify what those cuts might be.

House Republicans defended the governor’s plan. Rep. Mary Liz Holberg (R-Lakeville) reminded Democrats that they too had proposed a state budget based on speculative funding sources — namely, on tax increases the governor had promised to veto.

“It is a matter of perspective,” Holberg said. “They’ve chosen to include (the federal funding) in their budget. Last spring, the Democrats decided to include tax increases in balancing their budget, even though every indication was that it would never become law.”

To that point, Rep. Alice Hausman (DFL-St. Paul) argued that Pawlenty’s numerous vetoes of DFL proposals made it all the more important to know what his budget plan will be if the federal money falls through.

“We don’t have a lot of time here, and when (the governor) has such strong feelings, and anything counter is met with a veto threat, then we do keep seeking information,” Hausman said.

Looking for common ground

DFL leaders said they will release their own budget plan sometime after the release of the February budget forecast, scheduled for March 2. For now, Pawlenty’s proposal has given them plenty to chew on.

“It looks to me that the governor is cutting some important areas,” House Majority Leader Tony Sertich (DFL-Chisholm) said at a Feb. 15 press conference.

Sertich indicated a couple of likely points of contention in future budget negotiations between legislative leaders and the governor. He singled out the local government aid cuts as being particularly harmful, potentially forcing cities and counties to cut essential services like police and fire. Also, noting that the governor’s own estimate is that 40,000 Minnesotans would be impacted by the health and human services cuts, he said that is another likely source of disagreement.

House Speaker Margaret Anderson Kelliher (DFL-Mpls) indicated that filling the state’s budget gap might involve several steps, and that DFL leaders may look to enact some spending reductions relatively early on in the session.

“We’re going to do some work here early, before the February forecast comes out,” she said. “We’re going to try to make that problem be a smaller problem after we get that forecast, and then we’ll go from there.”

Senate Majority Leader Larry Pogemiller (DFL-Mpls) gave some clues as to where DFLers might find common ground with the governor at a Feb. 16 hearing. Speaking to his fellow members of the Legislative Commission on Planning and Fiscal Policy’s Subcommittee on a Balanced Budget, Pogemiller said the governor’s proposed cuts to higher education, state agencies and health and human services were all on the table — from the Senate’s perspective, at least.

Whatever ultimately happens, all parties seem to be in agreement about one basic fact: it is not a fun situation to be in.

“The list of options to resolve a $1.2 billion deficit after years of declining revenue is incredibly imperfect,” Hanson said.

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