When the state’s latest economic forecast hit the halls of the Capitol in St. Paul Dec. 4, the sentiment coming from lawmakers and the governor’s office was cuts, cuts and more cuts to the state budget. Since then, a $426 million shortfall for this biennium has been resolved. But there’s still a $4.8 billion shortfall to consider from 2010-11.
At a news conference on that woeful December day, Gov. Tim Pawlenty played the part of reluctant warrior, decrying the notion of a federal bailout package coming to the states — at least 41 out of 50 are running deficits — all the while grudgingly acknowledging that he’d take the money.
“The federal government of the United States of America is broke,” Pawlenty said, keeping his fiscal bona fides on the national stage, noting that government spending in Washington is “reckless and irresponsible.” Still, he called Minnesota a “significant net contributor” to the federal budget, and because of that, he considered it “appropriate to receive and accept this federal spending.”
Good thing, too, according to some observers.
“I think Uncle Timmy has to hope money comes to the states and will bail him out big time,” David Schultz, who teaches politics and government at Hamline University in St. Paul, said Thursday.
In fact, many states are waiting to see what an Obama administration is going to do after the president-elect is sworn in Jan. 20. Before Christmas, Obama floated the idea of a stimulus package that could swell to as much as $850 billion, accounting for aid to state and local governments, as well as unemployment benefits.
The number alone makes any potential bill passed by Congress as rare if not unprecedented, to say nothing of the sweeping plans it would entail. At the same time, while everyone awaits the official arrival of change in the White House, no one’s really sure what shape or form the money will come in — though any money is good money at this point.
And what if on the outside chance Pawlenty decides to reject any of it? “That would be very bad,” Sen. Tarryl Clark, DFL-St. Cloud, said Tuesday as the first day of the session wound down, “for the state of Minnesota.”
How much money and when?
It’s no secret the state of Minnesota is in quite a pickle right now, and the ominous budget problem is really the only story in this first week of the legislative session. Still, some lawmakers firmly believe that Obama’s hope is on its way.
“The money is going to be a reality,” said Sen. Steve Murphy, DFL-Red Wing. “As soon as the new president is sworn in, things are going to start shaking and happening.
“But,” he added, “we’re still putting together the parameters.”
Everyone is cautious because no one is sure if the money will come with strings attached, as some lawmakers have cautioned — in other words, state leaders want leeway on how to spend the money, and when.
But how much money are we talking about? Clark thinks it could be anywhere from $700 million to $1 billion. Murphy said he expects it to be “substantial,” but added that as much as $1 billion would be “wonderful.”
Schultz was even more optimistic, saying that he’s hearing rumors out of Washington that as much as $300 billion of the Obama administration’s package could be dispersed to all 50 states, putting Minnesota in line, eventually, for some $4 billion to $10 billion. (Murphy and Schultz both indicated the relief will come in at least two phases, if not more.)
But Obama is not the president yet, and he won’t be until Jan. 20. Will he and Congress be able to act quickly enough to make any difference for Minnesota this session?
“Congress wants to have a bill on Obama’s desk by the end of January,” Schultz offered. “The governor will wait until the end of January to propose his budget, and the Legislature won’t do anything with it until the next budget forecast in February, so there is time here.”
Where will the money go?
Clark, Murphy and Schultz all believe that the money will be geared toward infrastructure, the latest buzzword in politics. What it means is federal dollars to build roads and bridges, which puts Murphy, as the state Senate’s transportation committee chair, in the thick of things.
“I have not talked directly to anyone in the president-elect’s transition team, but I’ve talked to everyone else who has,” Murphy said, noting the Minnesota congressional delegation, in particular Rep. Jim Oberstar, chairman of the house Committee on Transportation and Infrastructure. “We’re looking at projects that were maybe going to be delayed a year or more, and now they’re keyed up. We might be able to turn some dirt come spring.”
Clark said she expects most of the money to be targeted toward “public works” projects, but some might also be spent on the state’s colleges and universities, and “some things related to Medicaid.” Shultz also believes there will be some money to spend on unemployment insurance.
Which begs the question: Can spending on roads and bridges, even as a job-creation tool, really have an immediate impact on the state’s current shortfall?
“It doesn’t help the state in terms of the budget deficit, quite frankly,” Schultz said. “And to stimulate the economy, you might have to wait until next year.”
Still, Schultz said, he’s hearing that many states are lobbying for cold-hard cash to cover their deficits now, something even Pawlenty might like to see at this point.
The one question no one at the Capitol besides Pawlenty is asking, though: Is this good governance?
“I have mixed thoughts on that myself,” Schultz concluded. “If you’re for states’ rights, this makes you more dependent on the federal government. And you’re not making the states make hard choices. It might be not-bad economics, but it’s not necessarily good governance.”
G.R. Anderson Jr. covers politics, the state Capitol and issues related to public safety.