Pawlenty administration outlines $1.2 billion state borrowing and deferral plan

State Management and Budget Commissioner Tom Hanson today confirmed a $1.2 billion state borrowing and deferral plan — one that Senate Majority Leader Larry Pogemiller characterized as the current governor leaving the next governor with unpaid “IOUs.”

Hanson told a joint House-Senate committee that the Pawlenty administration needs to borrow about $700 million from various state funds — including Minnesota State Colleges and Universities — and defer another $500 million or so in payments to K-12 schools, the University of Minnesota and corporate refunds to keep the state’s budget cash flowing.

Meanwhile, Gov. Tim Pawlenty, despite his opposition to some federal spending, has asked the U.S. government for more than $260 million in Medicaid and other assistance.

Commissioner Hanson also told the Legislative Commission on Planning and Fiscal Policy today that the state has arranged for a $600 million line of credit from U.S. Bank for any short-term borrowing that may be needed next year … when a new governor is in office. Hanson told the committee that New York bond houses are aware of the unusual short-term borrowing mechanism, and he doesn’t believe it will adversely affect the state’s bond rating.

The payment deferrals are known as “administrative actions.” Many were previewed in hearings in July. They have been common mechanisms to aid budget shortfalls. Short-term borrowing is less common.

But Pogemiller, who chaired the Legislative Commission today, said the state is in a “a cash flow jam,” and he criticized Pawlenty for leaving the state in a “fiscal condition that you don’t want to see your state in.”

Come spring, according to projections presented to the commission, the state will likely need to borrow money short-term to meet its obligations.

Today’s hearing came as the three candidates for governor continued to debate the economic health of the state. Pogemiller said the new governor will be left with what Pawlenty has not paid.

In another move, Gov. Tim Pawlenty — who has been stridently opposing the new national health care legislation — sent a letter (PDF) to U.S. Secretary of Health and Human Services Kathleen Sebelius requesting $263 million in federal health care funds known as FMAP, Federal Medical Assistance Percentages. In releasing the letter, the governor’s office said it was seeking the money that helps fund Medicaid and foster care recipients  because “the programs reflect current and longstanding Minnesota policy objectives and commitments.”

Maybe so, but Pogemiller also noted that the governor’s office needed those millions to better aid the state’s bleeding bottom line.

“I think it’s pretty clear that any discussion by future governors that there’s not a problem is ludicrous,” Pogemiller said.”I’ve served with six or seven governors and I don’t believe any of them has left the state in this kind of fiscal condition, other than this governor.”

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Comments (4)

  1. Submitted by scott cantor on 09/07/2010 - 05:01 pm.

    Just like the ingredients label on the food-like substances you buy at the grocer or the indications on a package of medicine, there should be truth in advertising laws for politicians and accountants. A billion dollars “borrowed” from schools isn’t a loan, it’s a CUT.

    There is no compensation for a student in 3rd grade this year, when their classroom is 30 students instead of 20 because the state withheld dollars. 3rd grade is done, over! You don’t do it again.

    And, should the state’s finances improve, who thinks that schools get this all paid back? If my district gets (PROMISED – X) this year, then next year do they get (PROMISED + X)? Ha ha ha ha! Fat chance.

  2. Submitted by Richard Schulze on 09/07/2010 - 10:41 pm.

    Yeah but the governor gets to keep the campaign slogan we paid for:
    “I did not raise income taxes”.

  3. Submitted by Thomas Swift on 09/08/2010 - 09:31 am.

    scott’s right; these are cuts, and I wish Pawlenty had the stones to call a spade a spade.

    Thankfully, Tom Emmer does.

    T-Paw is trying to play bothe sides against the middle. He should know better than to try and treat conservative voters like the Democrat party treats theirs.

  4. Submitted by Charles Senkler on 09/08/2010 - 11:53 am.

    Like a small business, goverment must find the balance between income and expenses. Politics as usual, where one side wants to cut costs with no tax increase and the other to increase taxes with no cost cuts simply won’t work.

    The silver lining for our current economic cloud is that our leaders may have finally hit the wall. They will have to co-operate, communicate and negotiate with each another to fix the problem.

    In business we have the power to manage the decisions our employees make and to try to make the goals of the business a priority, we have that same power as citizens it’s called the vote.
    If a politican can’t work for the good of the people, or doesn’t play well with others lets get rid of them and vote for some one who can.

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