When lawmakers and Gov. Tim Pawlenty ended the legislative session in May, budget negotiations went down to the wire. But in the end, leaders from both the Republican and DFL parties, as well as the governor himself, emerged all smiles, everyone rightly claiming a little piece of victory.
The goodwill masked what’s been looming for quite some time: a massive budget shortfall for the upcoming biennium.
“The budget we passed last session was not sustainable,” Rep. Patrick Garofalo, R-Farmington, said Tuesday. “Everyone knew it, but it was an election year.”
Good thing this year isn’t, because no voter is going to like anyone in St. Paul after this session.
It doesn’t start until Jan. 6, but Thursday will see the release of the state’s latest budget forecast, marking the unofficial beginning of the session.
And it’s not going to be pretty, with most observers estimating a shortfall of at least $4 billion for the new two-year cycle — as well as a shortage for the period that ends in June. (Pawlenty has already said he wants to start consulting with DFL legislators now, rather than later, on how to balance the budget.)
Thursday’s number may end up being the biggest budget gap in state history.
“There will be some painful decisions that the public won’t like,” Garofalo predicted.
Of course, public sentiment aside, the bigger question is whether the Republicans who want to cut and the Democrats who want to tax can come together.
In interviews with lawmakers, both sides clearly recognize the gravity of the situation, and some on each side even echoed the same talking points, noting vaguely that reform sometimes is a byproduct in times of financial crisis and agreeing, in theory, that no budget or project is sacred this time around.
“I don’t think it’s responsible to say anything is off the table,” Rep. Ryan Winkler, DFL-Golden Valley, said. “Whether it’s tax increases, budget cuts or deferring payments, everything’s in play.”
‘It’s going to have to be a combo platter’
Winkler and other lawmakers already are saying there’s no room for partisan bickering this time, and they hope that policy will prevail over politics to solve the problem.
“Anybody who comes in with ideology won’t be good negotiating partners,” Winkler said. “That means they’re not listening to voters.”
Putting politics aside, even Democrats are talking about cutting in ways they never have, but they’re also uttering the “T” word.
“It’s going to have to be a combo platter,” offered Rep. Steve Simon, DFL-St. Louis Park. “Those who say we can tax our way out of this is not being honest, and those who say we can hack our way out of this is not being honest.”
“I think even the staunchest anti-tax Republican realize we can’t do it by cutting alone,” Winkler said. “It’s not palatable to them, but we have to look at it.”
Not so fast, say Republicans, and certainly Pawlenty will resist the new-revenue argument.
“At the end of the day, there’s not going to be any significant tax increases passed,” said Rep. Jim Abeler, R-Anoka, citing strains on the middle class and businesses. “I’m not sure what group can accommodate taxes.”
Besides, as Garofalo cited, there have been four increases in the last year: the gas tax, adjusted license tab fees, and the two sales tax increases — one for metro-area transit projects and the other for outdoor preservation and cultural heritage programs.
The reality, however, is that DFLers have a veto-proof margin in the Senate and are only a handful of votes shy in the House.
“If we can get a dozen or two dozen [DFLers] to vote against tax increases,” Garofolo said, “then our numbers will be stronger.”
What goes first?
Nearly everyone believes the only untouchables are programs that cater to the elderly or the disabled.
“Nursing homes are off the table,” Garofalo admitted, sounding nearly like a bleeding heart for a moment. “We have to take care of the most vulnerable first.”
But then everything else will be scrutinized and debated. But many, like Winkler, note that some $22.3 billion of the state’s $34.5 billion general fund last time around was tied up in education and health and human services. “That’s 80 percent of it right there,” Winkler said. “If you say ‘We don’t touch those two,’ that’s not realistic.”
Also, there’s no tobacco fund to be raided, and not much in the state’s reserves. So everyone is looking at ways to trim — at least administratively — from Minnesota State Colleges and Universities and the U of M budgets. And then some education programs in K-12, even though any other year it would be political suicide to even speak of such things.
Then there are the state agencies — the Department of Health and the like — that will have to do some serious belt-tightening. Ditto for places like the attorney general’s office.
It’s also a good bet that Democrats will go after Pawlenty’s beloved JOBZ program, which Winkler called “a welfare project in the guise of a jobs project.”
Speaking of welfare, Republicans Garofalo and Abeler — surprise — suggested looking there to save big bucks. “In the budget, human services are unchecked,” Abeler said. “It’s based on what you think people are going to need, not on what actually gets used and how it gets used and who it goes to.”
But both sides say that there’s a chance to change here, like redoing the sales tax so that it’s cheaper but broader — paying less on more goods — and to restructure and reorganize many programs and departments.
“When there’s a deficit there’s a chance to reform,” said Garofalo.
“My hope is that there are reforms to pursue,” Simon said.
But it’s still doubtful that there will be consensus out of the gate, and maybe even not by the end. But will bipartisanship prevail early and often?
“That’s bullshit,” Garofalo said, chuckling. “We’ll be here until September.”
G.R. Anderson Jr. covers politics, the state Capitol and issues related to public safety.