Federal money arrives at Minnesota’s Capitol: The perils of budgeting Obama bucks

One of the hallmarks of Session ’09 at the Capitol this year will be the legislative panel chaired by House Speaker Margaret Anderson Kelliher. The Minneapolis Democrat and her fellow DFL leaders have resuscitated the Legislative Commission on Planning and Fiscal Policy in the spirit of making all budget finagling public, and also to circumvent any reception-room dealings behind the closed doors of Gov. Tim Pawlenty’s office.

Because of that, some previously unknown stars are emerging in the form of legislative fiscal analysts and bean-counters who are usually far from the political limelight.

The reason? The federal dollars coming to state coffers via President Obama’s American Recovery and Reinvestment Act are confusing the hell out of just about anyone trying to put together a budget in St. Paul.

“The federal dollars do make things more complex,” Kelliher said to Bill Marx and Matt Massman, fiscal analysts for the House and Senate, respectively, at a hearing last week. “How much more complicated?”

“It certainly complicates things,” Marx says when reached by phone. “I can’t recall anything like it, and I’m in my 13th year as chief fiscal analyst, and I’ve been with the House since 1976.”

No doubt local and state lawmakers all over the country breathed a sigh of relief when the $787 billion plan passed in February. Then, Tom Hanson, commissioner of the Minnesota Management and Budget office and anointed “federal stimulus coordinator,” estimated that the state’s take would eventually figure to around $4 billion. The mood at the Capitol, which was bleak in the face of a huge shortfall, lightened just a bit.

Now, as the first round of money from the package, referred to as “stabilization funds,” are creeping into budgets and bills for the 2010-11 biennium, lawmakers and staffers alike are breaking out in a collective case of what might be called spreadsheet-itis.

“It makes your spreadsheets look bizarre,” says Sen. Linda Higgins, DFL-Minneapolis, who wrangled with some Obama bucks while helping forge the public safety bill. “Because it came so fast and furious, there were questions on how the money could be used and what strings are attached.”

How the stabilization funds break down
Enough string, it turns out, to perhaps rival the world’s largest ball of twine found in Darwin, Minnesota.

According to House analyst Marx, the state is dealing with $816.5 million in stabilization money to help balance the 2010-11 budget.

Of that, $668 million must go to K-12 or higher education. The rest, some $148 million, can be used for general fund purposes. As it stands now, $38 million went into the public safety bill, most of the remaining $110 million will go to health care funding.

“That education money is a big challenge,” Marx says, because of something people are calling “proportionality.”

Explain.

“If there are cuts to higher education and K-12, you have to restore them proportionally with the federal money,” he says, meaning that you can’t feed money to one and not the other. And the “restoration” has to match the cut.

Why do cuts at all?
“If there are not any cuts, then they [the feds] will tell you how to use the money,” Marx adds. So, lawmakers have to make cuts in order to use the money as they see fit. Got it?

But, of course, there’s a string attached to that. According to Marx, state governments can cut state general funds as they wish to get the federal money — and restore with Obama bucks at will — but they must not go lower than 2006 budget levels.

There are other complications and parameters associated with the money, and this is just the first phase. Added to that is the desire by legislators and the governor to remedy a $4.6 billion shortfall, even when accounting for the federal money.

“We have to reconcile our perspective,” Marx says. “What legislators are talking about is what’s the net impact and how can we put it all together to meet all the rules.”

As for the rest of the stimulus package, that $4 billion total is anyone’s guess. “I don’t even know what the total of that is,” Marx says, adding that this round of fed money might actually be easier to understand how to spend than what’s yet to come. “The point is [this round] of federal money is flexible, relatively.”

Still, ‘thrilled to have it’
Is the stimulus package mucking up the already slow legislative process, as it appears?

“Absolutely,” says Rep. Tom Emmer, R-Delano. “The stimulus funds are here for two years, then gone. How do you look ahead to the next biennium?”

One answer can be found outside of Kelliher’s legislative commission hearings. There, budget commish Tom Hanson is called in to testify so often that he might was well move his desk across the Capitol grounds to where the meetings are usually convened. Ditto that for Marx and Senate fiscal analyst Massman.

“Tom Hanson is a legislative piñata,” Emmer offers.

So while Pawlenty’s point man may be taking a grilling here and there, don’t think for a moment that everyone’s not happy to have the dough.

Pawlenty in particular made a show of not wanting to take the federal money, likening any proposed government bailouts to a “house of cards” back in December, but the guv isn’t exactly turning any money down at this point.

“The fact that Obama bailed out the state is certain,” says David Schultz, who teaches politics and government at Hamline University in St. Paul. “Uncle Obama is the best thing that ever happened to Tim Pawlenty.”

Higgins shares the same worries as Emmer, who is in the other party and in the Capitol’s other chamber. “It makes it difficult in for the 2012-13 biennium,” Higgins says. “This stimulus must be used for 2010-11 biennium. For the next one, it’s gone.
 
Still, Higgins emphasizes, she’s “thrilled to have it.”

Despite all the accounting headaches, that’s a prevailing sentiment among pretty much everybody at the Capitol in these austere days.

“Meetings tend to drag on,” with the added questions about penny-pinching, Marx concludes. “Fair to say it adds a complication, but it’s helped us out, so we’re happy to have it.”

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

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Comments (1)

  1. Submitted by Bernice Vetsch on 05/13/2009 - 05:26 pm.

    Three. No, four, cheers for the Speaker’s firm commitment to openness while the budget is being negotiated.

    When the governor did want to meet in private the other day, she proved that she means what she says by announcing the topics/agreements after the meeting.

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