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Pie charts and numbers of Minnesota’s proposed budget fix don’t tell the whole story

Gov. Tim Pawlenty today outlined his cure for the state’s $4.8 billion budget gap, calling for a 2.2 percent decrease in overall spending.

Gov. Tim Pawlenty

Gov. Tim Pawlenty

When Gov. Tim Pawlenty was presenting his budget today, with use of pie charts and columns of numbers, it really didn’t look so bad.

Take a billion here, a billion there — presto. The $4.8 billion deficit is gone. The governor’s budget for the 2010-11 biennium would be $33.61 billion, a 2.2 per cent reduction from the 2008-2009 expenditures of $34.36 billion. A pittance, right? 

So, what’s it mean if you “decrease the increase” of  spending on something like the General Assistance Medical Care program that was supposed to get a 22 percent increase in the next biennium but would  get about a 9 percent increase in the Pawlenty budget proposal?

Cal Ludeman, the commissioner of the Department of Human Services, answered that one. About 55,000 adults would be out of luck on health insurance the first year. About 29,000 more the second year. These people, by the way, are the poorest of the poor.

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“We have to slow down the growth of Health and Human Services,” the governor said.  “… It’s unsustainable.”

Even by slowing the growth, Ludeman says, the state will be providing health care for 700,000 “lives” by the end of the biennium. Ludeman uses the word “lives” instead of “people.”

Of course, the number of people out of work and out of money is growing every day. Isn’t the health care problem going to get worse?  That question was asked of Rep. Marty Seifert, R-Marshall, the House minority leader and a supporter of the governor’s budget.

“We’re going to be like Wisconsin and most other states,” Seifert said.

But what of the growing numbers of people who have lost their jobs and their health insurance benefits?

“We have job training programs,” Seifert said.

A bewildering cycle
But, of course, there are fewer and fewer jobs. Ah, it’s a bewildering cycle.

All of this is not to say that the governor and the Republicans are awful. The budget problems the state faces are huge. The point is that real Minnesotans are behind the numbers, and the governor’s budget seems to come down heaviest on the poor, in part because Health and Human Services takes up 33.7 percent of the state budget.

The budget also knocks out lots of small things, such as the state’s art board and the state’s humanities board. It would end the state program of refunding small political donations (that’s a savings of about $4 million) and it would change the Perpich School of the Arts from being state-sponsored to being a charter school. That would require the school to find its own funding.

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And then there’s a biggie. Pawlenty again wants to take another whack at his favorite target, Local Government Aid, this time by 25 percent over the biennium. Such a cut, a group of mayors said following Pawlenty’s presentation, would have real impact on real people. Such a cut would mean lost municipal and county jobs. It would mean fewer cops and firefighters. It would mean more potholes unfilled, less snow plowed.

“We’ll be plowing streets every other blizzard” is how Wadena mayor Wayne Wolden put it.

It wasn’t clear if he was kidding.

Wolden did point out that when his city was hit by a snowstorm on a recent weekend, no streets were plowed until Monday.

“We are not paying overtime,” he explained.

Pawlenty seems to have little empathy for local governments. He pointed out, anger in his voice, that county commissioners in some metro area counties have given themselves raises in recent weeks.

He wants pay freezes for all public employees. He suggested that cities that have contracts with union employees re-open those contracts and knock out increases.

Will he try to re-open the contracts of state workers?

“No,” he said.

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He also said that he wasn’t interested in eliminating state jobs.

“That would just exacerbate the problem” of the declining number of jobs in the state. He did add, however, that when the state starts negotiating with its unions this spring, he expects unions to take wage freezes as a trade-off for keeping jobs.

Interestingly, Pawlenty, who has preached that the state must be looking more to the future than the past, presented a budget that relies heavily on head-spinning accounting gimmicks that may offer short-term solutions but do nothing to address future budget problems.

Up in smoke?
Take tobacco money, for example. A couple of years ago, Minnesota used a big pot of one-time tobacco settlement money to fix the budget. That money’s gone. But still, there’s been a steady stream of revenue coming into the state from the tobacco settlement. It’s been like an annuity – and it was supposed to keep streaming in for the next decade.

The governor is proposing that the state sell half of that stream of money for $983 million in the form of bonds.

“Securitization” is the word Seifert uses to describe the transaction.

But by any term, that seems to be selling future revenues for a one-time hit.

The governor also is counting heavily on the federal bailout legislation currently being discussed in Congress. He’s assuming that the state will receive $3 billion from the feds, and that about a third of that will be able to be used in the general fund. Again, that would be a one-time jackpot, which does nothing to get the state’s fiscal house in order in the future.

And, of course, there are the usual accounting shifts pols always turn to in tight economic times. For example, rather than the state paying a school district the money it owes in 2010, it will pay that money in 2011. The district, then, will be forced to scramble and write out a large number of IOUs to various vendors.

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Rep. Tony Sertich, DFL-Chisholm, the House majority leader, was raising his eyebrows over all these gimmicks. “We don’t want any Ponzi schemes in the governor’s budget,” he said.

There is an obvious reason that the governor’s budget is filled with so many of these accounting devices: He pledged he would not raise taxes, and he’s sticking to it. In fact, the only mention of taxes in his budget are tax CUTS for business, cuts that call for reducing the corporate income tax from 9.8 percent to 4.8 percent over the next six years, and a variety of smaller tax cuts for smaller businesses.

House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, said she agrees with the governor that the state’s business climate must be improved, but she doesn’t see that cutting the corporate tax is particularly helpful.

She said that 46 percent of the corporate income tax collected comes from “companies not located in Minnesota [but doing business here]. There’s no oversight [in the governor’s proposal] as to where they would invest that money in Minnesota.”

But Republican legislators were quick to criticize their DFL brethren. DFLers, they note, are coming up with no proposals of their own.

Kelliher and Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, said they will come up with proposals only after they’ve had more time to study the details of the governor’s proposal and only after they’ve held a series of hearing around the state.

DFLers mum so far on dreaded phrase ‘tax increase’
Interestingly, DFL leaders have yet to use the phrase “tax increase” when discussing their views of the budget problems. Republicans find that omission almost amusing.

“I’m expecting a barrage of revenue increases [taxes] to come forward from the DFL late on a Friday night sometime in April, when all of you [he pointed to reporters] have gone home,” Seifert said.

On Tuesday, about the only pol at the state Capitol willing to imply that tax increases are necessary was St. Paul Mayor Chris Coleman. If the newest round of LGA cuts actually happen, he said, St. Paul would have to take another $24.8 million out of a city budget of $200 million. The city, he said, already has frozen salaries, put in place a hiring freeze, canceled a police academy class and closed eight recreation centers.

What would he do if he were governor?

“You have to have an honest conversation with people about what services they’re receiving,” said Coleman. “We haven’t been honest about what it costs to run government. … We have to get past this mentality that you can get something for nothing.”

Of course, Pawlenty’s presentation was just the beginning.

Or, as Sen. Dave Senjem, R-Rochester, the Senate minority leader, put it: “Let the games begin.” 

Doug Grow writes about public affairs, state politics and other topics. He can be reached at dgrow [at] minnpost [dot] com.