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The great Minnesota get-together: Can Pawlenty, DFLers agree on a budget plan?

State Economist Thomas Stinson (right) outlines Minnesota’s economic troubles today as Tom Hanson, commissioner of Minnesota Management and Budget, looks on.
MinnPost photo by Craig Lassig
State Economist Thomas Stinson (right) outlines Minnesota’s economic troubles today as Tom Hanson, commissioner of Minnesota Management and Budget, looks on.

Thursday’s unveiling of the state’s most recent budget forecast certainly cast dark clouds over the Capitol in St. Paul: The shortfall for the current budget cycle is at $426 million, and the 2010-2011 biennium is short some $4.8 billion. Still, Gov. Tim Pawlenty and DFL legislative leadership were casting about for a silver lining in call-and-response press conferences this afternoon.

“This is a big challenge, but it’s a big opportunity for reform and the streamlining of government,” Pawlenty said, a variation on a talking point he hit repeatedly. “Necessity is the mother of invention.”

House Speaker Margaret Anderson Kelliher said: “There will be a lot of innovation in the Legislature about how we budget this time.”

That forced optimism aside, there sure were a lot of grim faces at the media gatherings and around the Capitol grounds. The forecast, released by the Minnesota Management and Budget office, had everyone believing that it was the worst shortfall in state’s history, even worse than that of 2002. “If it’s not the biggest, it’s pretty darn close,” Pawlenty said.

What that means is that the upcoming legislative session, slated to start Jan. 6, is nearly in full motion already. Pawlenty wants to start work immediately to clear up the shortfall for 2009, and to that end he and Anderson Kelliher and Senate Majority Leader Larry Pogemiller are sitting down for what likely will be a stomach-churning breakfast Friday morning. And indications are, from today’s comments, the cat-and-mouse has already started.

What budget items are going to be cut? No one would say for sure, and both the governor and the Democrats were cagey enough to not even offer suggestions or hints, just to say that nothing is off the table. There must’ve been some kind of record set for non-answers given in a 90-minute period today.

In fact, Pawlenty said more about the possibility of getting federal dollars into state coffers than anything else, but took great pains to rail against federal budget policies. This indicated that at least some of his battle will be waged on the national stage — you know, should he ever want to run for president or something like that. And DFLers, who wield considerable power with strong majorities in both the House and the Senate, managed to take 30 minutes of questions from reporters without ever uttering the dreaded word “taxes.”

“I think many of you,” House Majority Leader Tony Sertich said, “are trying to read the last page of the book first.”

Cut and hack vs. tax and spend
Well, let’s at least jump past the prologue and wade into where some cuts may come — and what budgetary couch cushions might have some chump change hiding in them.

For starters, Pawlenty ran some numbers on the current shortfall, and noted that there’s $155 million in reserves, meaning there’s some $271 million from the current budget that needs to go. For a clue as to how some of that might be made up, Pawlenty offered past practices like automating paperwork in some departments and consolidating and/or elimination some state agencies, which he took pains to point out he had done. (This, no doubt, was at least in part an effort to distance himself from the mess.)

He also talked about hiring freezes and the like, but in reality he’s going to have to cut — whether he does it alone or with lawmaker leadership is up to him, but he did note he had started to “trigger the governor’s unallotment authority,” which allows him to start taking funding away from budget items already passed.

Still, he and all the DFLers made it clear that they’d rather start working together now.

“If the governor thinks this is a single-person exercise,” Anderson Kelliher noted tartly, “that would be a misread.”

Still, neither side, despite repeated questioning, gave any specific examples of where money might be saved.

As for the next biennium, Pawlenty did indicate that he was looking at Health and Human Services, saying that the budget there was poised to rise some 21 percent. “It’s unsustainable,” he said. “It’s mathematically difficult if not impossible.”

When pressed he said he was “not necessarily” looking there, but that “Minnesota has programs in that regard that many other states don’t have.” He also wavered on whether he would make cuts in Local Government Aid, the state program that disperses money to cities and municipalities.

As for the Democrats, Anderson Kelliher was sounding like a starve-the-beast Republican. “We’re going to start by making cuts,” she said by way of answering a question about the possibility of new taxes.

‘No magic bullet’
Both the governor and the DFLers want to keep spending for 2010-2011 at $32 billion from the general fund, and both agreed that they would start at zero and work their way up, rather than take a figure of, say, $38 billion and try to work it down.

“We’re going to work our way from the ground up,” Anderson Kelliher said.

“We’re going to start with zero and build our way up to 32,” Pawlenty said.

But then what? The Democrats tried to make it all about jobs, noting that according to state economist Tom Stinson, the state lost 25,900 jobs through October this year. But other than Anderson Kelliher talking about “cleaner, greener” job growth, nothing much specific was offered.

Pawlenty said that his top priorities are military and veterans, public safety and K-12 education. Does that sound like Pawlenty in 2012? (In regards to gambling money, he said “we’re not going to revisit it.” The notion of a new Vikings stadium “doesn’t seem to fit in the priorities list.”)

So, that leaves federal money, which has been talked about in helping the 41 out of 50 states that are likely running deficits. “The federal government of the United States of America is broke,” Pawlenty said, sounding like a bit of a maverick candidate. “It’s a Ponzi scheme, it’s a house of cards, it will collapse, it’s reckless and irresponsible. I’m gravely concerned about the federal government spending in that regard.”

But he said that Minnesota is a “significant net contributor” to the federal government, putting in a dollar for every 73 or 75 cents returned. “I consider it appropriate,” he said, ending some days of speculation, “to receive and accept this federal spending.”

In the end, though, that seemed like the only concrete way out offered. Unless, of course, the two sides can come together early and often and find a number of solutions.

“If anyone says there’s a magic bullet,” Sertich said, “they’re not being honest.”

G.R. Anderson Jr. covers politics, the state Capitol and issues related to public safety.

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Comments (8)

  1. Submitted by Josh Ondich on 12/04/2008 - 08:54 pm.

    If the DFLers and Gov. Pawlenty need to start showing fiscal responsibility if they want to get anything done these next 2 years. raising taxes is not the solution. we are in a deep recession the state government needs to start controlling spending.

  2. Submitted by Paul Mielke on 12/05/2008 - 09:25 am.

    Some spending cuts and tax increases are in order. But if the conservative Republicans insist on demonizing the poor and go immediately after TANF and other welfare first, it is time to change the MN constitution and allow the state government, in hard times like these, to run deficits. They would only be allowed to be temporary and only for the purpose of dealing with these economic downturns.

  3. Submitted by Paul Udstrand on 12/05/2008 - 09:54 am.

    Magic Plan economics is a bust. We cut taxes and waited for the magic. There is no such thing as magic, surprise, we’re screwed.

    Pawlenty’s economic plans are driven by ideology not economics, and we now have a huge mess to show for it. This is worse than people realize, after 6 years of Enron accounting to make the budget look better than it was, there are just no more tricks up anyone’s sleeve. We now have one of the highest per capita deficits in the nation because our governor via his veto pen, refused to factor revenue and inflation into his budget, and the people of MN failed to realize that their $500 tax cuts were costing them thousands. I doubt Pawlenty fails to factoconsider revenue and inflation when looks at his family budget by the way so let’s not hear the tired old “we’re gonna tighten our belts like any family” crap.

    By the way, is Polad going to have to tighten his belt and kick in more money for the stadium so we can divert some of that tax revenue back into county services? Why is Polad’s welfare program the only one in the state that isn’t going to face “cuts”?

    The only way to resolve this is a combination of tax increases and budget cuts. Government cuts alone won’t work because they will have a multiplier effect on the recession at this point. We’ve been cutting for 6 years and it hasn’t worked, at this point we’d be cutting off our nose to spite our face. The big savings in efficiencies that Republican’s promised never materialized because surprise surprise, while nothing is completely efficient, the government wasn’t THAT inefficient to begin with. You can save a few million here and there, but not billions. We haven’t been eliminating inefficiencies, we’ve been cutting services, there’s a difference. This is what happens when you hire a bunch of people who don’t believe in government to run the government.

    This drive towards mediocrity is finally yielding results, and according to Pawlenty average is good enough for him. Sure, this is a guy who got paid 85,000 for being an executive who did absolutely nothing at a dummy company called “Bamco”. When was the last time he had to deal with a budget deficit in his home? The problem with making “average” your goal is that when you aim for average, you get below average. There’s a difference between settling for average, and aiming for it.

    The question now is whether or not a bunch of mediocre politicians can deal with what may well be the worst state budget in the country? I’m not optimistic.

  4. Submitted by Bill Siegel on 12/05/2008 - 12:37 pm.

    Paul, I couldn’t agree more!

  5. Submitted by Bernice Vetsch on 12/05/2008 - 03:48 pm.

    Right on, Mr. Udstrand.

    Several years ago, Growth & Justice released a study with recommendations for modest increases to the income taxes charged Minnesota’s richest citizens, many of whom have asked over and over for tax increase at their leve. The result WOULD HAVE BEEN $2 billion in revenue per year. No shortfalls. No cutting people of MinnesotaCare. No taking dedicated funds from the tobacco fund and using them to balance the budget. No excruciatingly harmful annual cuts to cities and towns that resulted in ever higher real estate taxes

    May I suggest revising Article VIII of the Minnesota State Constitution to allow impeachment when a governor uses his ability to control tax policy to harm the state and its most vulnerable people?

    Why have the mainstream Minnesota media given this governor a free ride for years when they should have been educating the public on what the no-tax policy is meant to do (shrink government to a level allowing for protection of property rights and not much more)?

  6. Submitted by Paul Udstrand on 12/05/2008 - 07:14 pm.

    I’ve been thinking for about 8 years now for some reason that we ought to be able to impeach elected officials, and supreme court justices for gross incompetence and/or negligence.

    It’s also rather rich that Pawlenty invokes the notion of ponzi schemes on the federal level. This is guy who has produced nothing but one ponzi scheme after another for balancing the budget his entire term in office thus far.

  7. Submitted by Linda Squires on 12/05/2008 - 08:28 pm.

    I recently read an op-ed column by George Will, noted conservative (Republican) writer who is often on the Sunday talk shows. In his column he wrote “We have a toxic aversion to taxing ourselves enough to pay our bills.” It was so simple and straightforward and TRUE. The Republicans accuse the Democrats of “taxing and spending” and I think Democrats need to frame the issue that Republicans want to “borrow and spend” and that leaves the bills to our kids and grandkids…not right, not fair. We cannot go on indefinitely with a mind-set of “no new taxes”. So, I hope with majorities in both Houses, we can get Gov. Pawlenty to come to his senses.

  8. Submitted by Gary Leatherman on 12/08/2008 - 10:57 am.

    We are in serious trouble people, in case no one’s reading the economic news. I mean serious – Great Depression II, kinda stuff. Novembers layoff totals will look miniscule compared to the next to the post-holiday totals.I predict 10% unemployment easily as Obama takes office. As Minnpost reports today, Minnesota is not immune. We are going down with the ship as well. We should, as a state, not be talking about any budget cuts or raising taxes, until we get the ship righted. Obama and his economic team are on the right track with a huge investment in infrastructure, but we in Minnesota (all states actually) need to follow suit and invest in our own infrastructure/jobs. That means spending now! Investing now! Not cutting. This is basic Macro Keynsian economics (follow Krugman at NYTIMES if you need a primer). We will have to dig our way out when the economy is back on its feet and people have jobs (YES THAT WILL MEAN HIGHER TAXES). This should be laid out CLEARLY and DISTINCTLY. You will get back to work, you will have a job, but EVERYONE will have to pay higher taxes in the future when the economy has stabilized to pay off the mess Pawlenty/the no tax jerks/George Bush/Republican party has put us in with terrible, terrible decisions (economic and otherwise) over the past 8 years. You will see the result of their decisions over the next 6-12 months. We have to be intelligent and make some adult decisions over the next 3 to get our way out of this. And sadly, that means creating a huge deficit now. Tighten your belts, everyone, it’s going to be a bumpy ride.

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