Pawlenty heading into uncharted territory with his budget fix

Gov. Tim Pawlenty
Gov. Tim Pawlenty

Within the month, Gov. Tim Pawlenty is headed to a place no Minnesota governor has gone before. He’s going to unilaterally balance the state budget by executive decree, using a process known as unallotment.

On paper, the process is simple. He’s going to subtract more than $3 billion from spending bills he’s already signed to bring the state’s 2010-11 budget into balance with expected revenues at $31.4 billion.  

On one hand, it doesn’t seem so difficult.

Pawlenty is expected to get half of the balancing job done by using accounting shifts that will delay when schools get their K-12 funding. In addition, he’s already started the budget-cutting process by using line-item vetoes to trim $400 million.

That leaves between $1 billion and $1.3 billion to be cut through unallotment for the new biennium, which begins July 1.

Some wiggle room in unallotment plan
Pawlenty’s plan actually would use a tactic that provides a fair amount of wiggle room for both the governor and legislators — by making most of the cuts from the second year of the budget.

By then, two things could happen that would take some of the pressure off of Pawlenty’s decisions: One, the economy could improve, bringing more revenue into state coffers and allowing some of the cuts to be restored. Two, even without substantially new revenue, the Legislature next session could decide to restore some of the governor’s cuts by making other tweaks to adjust the budget.  

On numerous occasions, the governor has said that state government needs to tighten its belt, just like nearly everyone else in Minnesota has had to do in “the toughest economic times since World War II.”

But what makes this task tougher than it may appear is that the much-maligned Legislature did hold the line on spending. The budget it proposed — including $1 billion in new taxes — would have been little different from the 2008-2009 budget.

By twice rejecting the legislative plan, the governor actually is shrinking state government. For the first time in state history, the new budget will be SMALLER than the $33.9 billion biennial budget that preceded it.

This is good political rhetoric for a man who appears to have national ambitions. “Look at me,” he will be able to tell the conservative base of his party.  “I SHRANK GOVERNMENT.”

But Pawlenty, a consummate pol, understands that such a boast would come with risks. It is one thing to talk tough about cracking down on spending and tossing a few people who live under bridges off “welfare.” But it is another to be the person responsible for shutting down hospitals on Main Street, Minnesota. It is one thing to talk about belt tightening. It is another to be the governor when a state university and community college system has skyrocketing tuition costs.

There are real people behind those huge numbers. DFLers — and any number of interest groups ranging from hospital administrators to mayors of towns of all sizes — are predicting doom, gloom and substantial job losses by the time the governor is done.

The governor continually has pooh-poohed the dire talk as “overstatement.”  

Some expecting lawsuits challenging Pawlenty unallotment
Additionally, Pawlenty almost certainly will face a lawsuit or two before this process is done.

Those suits are expected to come from interested parties — hospital or education associations or labor groups — out to test the constitutional authority of the way Pawlenty intends to use unallotment.  Although the process has been allowed since 1939, this will be only the fifth time that it has been used — the third time, though, by Pawlenty. (Rudy Perpich and Al Quie were the other two governors to use the device.)

But Pawlenty’s plan this year is a hugely different use of the tool both in timing and magnitude. In all other cases, unallotment was used as a last-gasp tool to balance the budget in the second half of the second year of the biennium. This time, though, the governor is starting on the front end. Also, the planned cuts are 10 times larger in scale than any previous unallotment.

What started as a threat a few days before the end of the legislative session — “there will be no special session, no government shutdown, no increase in taxes” — has become a reality. He’s on the verge of doing what he said he’d do. He’s balancing the budget by himself.

House Speaker Margaret Anderson Kelliher
House Speaker Margaret Anderson Kelliher

“I would say it is likely that some group will file a lawsuit,” House Speaker Margaret Anderson Kelliher predicted in an interview with MinnPost.

The basis of the suit?  Kelliher was vague on specifics but suggested there are potential “separation of powers” issues about the unallotment law and the governor’s planned actions.

The budget is, after all, supposed to be a product of the Legislature and the governor. State statute says the governor, working through the finance commissioner, “shall use” unallotment when “probable receipts for the general fund will be less than anticipated and that the amount available for the remainder of the biennium will be less than needed.”

DFL legislators like to point out that there was nothing unanticipated about this shortfall. The governor signed virtually all of the DFL spending bills but vetoed the revenue bills that would have covered the costs, in effect unilaterally creating the “imbalance.”

So here we are.

Legislative commission has limited role
Start with the process and the key dates: The new biennium begins July 1. A committee, the Legislative Advisory Commission, made up of legislators from House and Senate tax and finance committees, must meet and be informed by the finance commissioner, Tom Hanson, of the cuts the governor plans.

But this committee is without power and is only consultative.

In the period between when the cuts are announced and when they actually take effect, Kelliher said the commission may well schedule public hearings to discuss the impact of the unallotments.  But all members can do is talk and listen — and make their case to the public.

Kelliher — and other DFL leaders — continue to believe that when Minnesotans hear the impact of the deep cuts, they will all but storm the Capitol. She also thinks that many people will be upset when they correlate expected cuts in local government aid with almost-certain increases in their property tax bills.

“Minnesotans get that there needs to be shared sacrifice in balancing the budget,” she said. “They get that you need to have a pay-as-you-go approach to managing government. They get that there will be real pain caused by these cuts.”

Maybe, maybe not. For the most part, Pawlenty so far seems to be getting higher marks than the Legislature in terms of the correct solution for balancing the budget.

Unallotment law details not that clear
All of this is happening in a surprisingly foggy environment.

The nonpartisan House research department compiled a 14-page brief (PDF) about the workings of the process.  What’s most striking is the number of times the document uses the phrase “the law is not clear” about what the governor can actually do.

For example, he apparently can unallot some funding for constitutional offices, such as the attorney general’s office. But he apparently cannot unallot appropriations for the courts or the Legislature or for the payment of unemployment benefits.

One thing is clear: Although many states grant governors some unallotment powers, few states seem to give so much power to the chief executive as Minnesota does.

One other thing is clear: Watch for the Legislature to do some “unalloting” of its own next session by trying to rewrite the statutes in such a way as to reel in the governor’s super-unalloting powers.

“I suspect that [gubernatorial powers] will be visited next year,” Kelliher said Thursday.

Under current law, for example, the governor, through his commissioner of finance, is required only to consult with the legislative committee.

Legislature will try to rein in Pawlenty next session
Watch for the Minnesota Legislature to get more in line with other states by trying to give that committee the muscle to go thumbs up or down on a future governor’s planned unallotments.  The Legislature also may try to limit the total amount (in percentage terms) the governor can unallot.

DFLers may have the tacit support of Republican legislators in scaling back unallotment powers.

Although Republicans  outwardly applauded Pawlenty “for being the adult in the room” by threatening to use his power of unallotment as the session neared conclusion, they also are nervous about yielding so much legislative power to the chief executive. They understand that in politics, nothing is constant.  The day almost certainly will come when the roles are reversed and a Republican-controlled Legislature will be whining about a DFL governor acting as if he or she is  king or queen.

But efforts at restricting gubernatorial powers will have to wait for another day.

For the moment, attention is on the immediate budget problem. The governor and Hanson are free to have at the budget, and Kelliher wonders if the governor isn’t feeling a little isolated.

Finance Commissioner Tom Hanson
Photo by Craig Lassig
Finance Commissioner Tom Hanson

“I think he has to feel a little lonely,” she said. “As much as he likes to think he acted as the adult, it reminds me more like the behavior you see from a teenager. You take an action without thinking through the consequences. … I’m still capable of working with the governor.”

Although there are rumors around the Capitol that the governor and legislative leaders will somehow get together and agree to a one-day special session to work out the mess, there is no evidence to support the rumors.

Since the session ended, there have been no olive branches extended from the DFL legislative leaders to the governor or vice versa.  There have been no informal breakfasts. Not so much as a casual tweet.

“The governor sent a form letter to all legislators,” said Kelliher. “It wasn’t personal. It basically said, ‘Now I’m interested in your input.’ ”

Legislators spurn governor’s call for input
Brian McClung, the governor’s spokesman, forwarded comments the governor has received in response from a handful of legislators.

Sen. Warren Limmer, R-Maple Grove, for example, suggested the governor make across-the-board pay cuts for state employees, including legislators and the governor. (Limmer didn’t address, though, the legal complications arising from union contracts.)

Sen. Dan Skogen, DFL-Hewitt, suggested that the governor have a roundtable discussion, and Sen. Julie Rosen, R-Fairmont, asked that the governor protect state meth-treatment programs.

McClung said the governor “was hopeful” that other legislators would come up with more suggestions by the end of last week, the governor’s self-imposed deadline on receiving guidance from the legislators.

Legislative leaders opted not to participate in playing Pawlenty’s suggestion-box game.

“I stand by the work the Legislature did for five months,” said Keilliher, uttering what has become a standard line used by DFL leaders. “We talked with thousands of Minnesotans, we held hearings, we sought a balanced approach. We sent him a balanced budget.”

However, in a letter to the governor (PDF) released Friday, Kelliher and Senate Majority Leader Larry Pogemiller restated many of their concerns and asked him to “strongly consider the repercussions” of his planned actions.

Pawlenty also set up a website, seeking input from good-old, everyday Minnesotans about how the state could solve the budget crisis.

McClung forwarded some of those suggestions from unnamed citizens to MinnPost, too:

“When I was at the Capitol visiting legislators, I noticed that there are many nicely bound books that are published every year or two years,” one wrote. “They are the directory, with pictures of each legislator, etc. I think these are a waste of money. …”

Another citizen suggested the state “create tax revenue, create jobs, save gas” by keeping liquor stores open on Sunday.

Another citizen suggested that the state should expand gaming with a racino.

Still another applauded Pawlenty for vetoing a tax proposal that would have created a fourth income tax tier. “You should publicize what happened in Maryland recently when it raised taxes on wealthy taxpayers substantially and 1/3 of them relocated to another state,” the citizen said.

This sampling shows the governor’s not going to get $3 billion worth of ideas from either legislators or the public, particularly since many of the ideas could not be unilaterally implemented by the governor without legislative authorization.

Where’s he turning for advice?

According to McClung, Pawlenty met with his commissioners to discuss unallotment on May 21.

“We are having regular meetings as the process moves forward,” McClung wrote in an e-mail. “In addition, Commissioner Alice Seagren (Education), Cal Ludeman (Human Services), David Metzen (Higher Education) and Ward Einess (Revenue, e.g. cities, counties) are holding meetings with organizations and stakeholders that could be affected by possible unallotments to solicit their input and advice.”

Best guess is that the governor has already made most of his decisions. For the moment, he seems calm about doing what no governor has done before.

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

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Comments (16)

  1. Submitted by Steve Titterud on 06/01/2009 - 03:06 am.

    We in Minnesota should modify the powers of the governor by whatever means are necessary – statute or constitutional amendment.

    We will be better off with a “weak” governor form of state government. Molly Ivins used to joke about how little George Bush could do as governor of Texas – how weak that office was – relative to the legislature.

    Here in MN, the powers of the governor’s office are obviously no laughing matter. This guy is going to hurt a lot of people, and he’s going to be REAL SMUG about it to boot.

    The line item veto should be eliminated, and the unallotment process changed so that it is truly a power acquired only in an emergency.

  2. Submitted by Stephan Flister on 06/01/2009 - 05:49 am.

    An informative article, but this part of the lede was troublesome: “He’s going to unilaterally balance the state budget by executive decree…”

    In my view we need to remember the legislative package was already balanced. What Pawlenty is doing is not balancing the budget, but making up for the lack of revenue he caused by vetoing portions of the legislative package.

    So, something like “unilaterally reducing the size of the budget” would be more accurate while not implying the legislature passed an unbalanced budget.

  3. Submitted by Lora Jones on 06/01/2009 - 07:51 am.

    “Maybe, maybe not. For the most part, Pawlenty so far seems to be getting higher marks than the Legislature in terms of the correct solution for balancing the budget.”

    I’d be interested in knowing the basis for the above paragraph. Higher marks from whom? Grover Norquist? I haven’t heard from or spoken to any Minnesotan who thinks Pawlenty is doing or has done the right thing. Yes, there are comments in the Strib saying as much, and lord knows Sara Jancek is happy (or is it harpy) — but I’m not too impressed by the opinions of trolls.

  4. Submitted by Paul Udstrand on 06/01/2009 - 09:12 am.

    If the Democrats want people to march on the capital (which I think would be a great idea) they better organize it. One thing I’ve never understood about the Dems is their failure to comprehend the notion of popular support. T-Paws popularity numbers are down, most Minnesotans support combination of taxes and cuts, this is doable. There are a gazillion existing groups that could mobilize and organize a huge capital rally if the Dems simply proposed it and helped publicize and promote it.

  5. Submitted by Joel Reiter on 06/01/2009 - 10:24 am.

    The silliest part of this article is that Republican legislators secretly fear unallotment power being used by a Democat. Yes, I’m sure the Republicans are quaking in their boots at the possibility that Republican backed spending increases will be axed by a DFL governor. Get real!

  6. Submitted by Jeremy Powers on 06/01/2009 - 10:37 am.

    Pawlenty’s unallotment power grab is just wrong, regardless of how the rules may be currently written. It’s just wrong in a democratic state for anyone to make such unilateral decision. It’s not fair, it’s not just, it’s not what people think their government should do. When we start seeing police and nurses laid off, people will be screaming for changes.

  7. Anonymous Submitted by Anonymous on 06/01/2009 - 10:52 am.

    I read this article quite quickly, so I may have missed the part where the Democrat dominated legislature had five months to come up with a balanced budget and failed to do so and how much money was wasted because of this – money that could have been spent on educating our children.

  8. Submitted by Francis Ferrell on 06/01/2009 - 11:16 am.

    Forgetting all the rhetoric and malarkey concerning state government that has been expounded recently, state government is a mess and we, the voters, only have ourselves to blame. Gov. Tim Pawlently is a product of this malaise/malady along with many legislators who have only a basic myopic knowledge of how government is to function.

    For whatever reasons, many legislators and the governor alike seem to have lost the vision [of the future] for the state. Courageous, dynamic, innovative, and populist progressive thinking have gone the way the way of the ox cart. The only progress in state government is for a select selfish and self servicing few who few public service as a means to a benevolent personal end.

    If you think I am somewhere in the twilight zone of reason, back away from your political viewpoints and look at the overall view of MN government etc.. You will see what I mean.

    What happen to the principles of government, laws and the viability of the state’s and US Constitution’s tenets?

    How did MN with its bicameral republican system of representation let our state’s fiscal affairs ‘totally’ be handled by the power of one person? Doesn’t the common citizen have a viewpoint anymore?

    Yes, I am angry at the affairs of this state. In all our personal selfishness, ignorance, and political pettiness did we the people forget our American and MN precepts of righteousness and fair play?

    The old political pundit and sage was correct, “We get who we vote for and want”… from government and politics. Is that what happened here in the train wreck of MN state government? This disenfranchised citizen and voter wants to know?

    p.s.; Since I am not running for any electable office etc., and have no ulterior motives for such, I just want simple intelligent answers to what appears to be straight forward questions.

  9. Submitted by Richard Schulze on 06/01/2009 - 11:19 am.

    The legislature had it’s opportunity to have a meaningful impact on the budget. They chose a different route.

    Perhaps this is simply an opportunity for
    the governor to prove his point. The point being, that cities, counties and the state are capable of trimming their respective budgets to simply “live within their means”.

    The state over the past number of years has experienced double digit growth. The result of an economy fueled by low interest rates and homeowners using their homes as ATM machines. I believe the governor has described this past growth cycle as a “house of cards” and thus not a sustainable model.

    As such, our state economy will reset and do so at a lower rate of growth with lower revenues.

    Combine the fact of reduced revenues and the fact that during the next biennium there will not be a multibillion dollar stimulus from the Feds to the state.

    I would say that number crunching during the next biennium is when all of this will get real interesting.

    Ultimately the citizens need to decide which services they would like to pay for and then to decide at what price are they willing to pay for these services.

    The governor should not be faulted by doing the work that the legislature had an opportunity to do, but instead chose a follow a different path.

  10. Submitted by Luke Hosfield on 06/01/2009 - 11:32 am.

    I agree with Spencer that the Democrat controlled legislature failed to compromise with Pawlenty. However, their failure should not give Pawlenty the right to take over the legislatures’ job. I think the reason why the unallotment process is so foggy is because it is so foreign to the American system of checks and balances. Pawlenty needs to stick to what he was elected to do. Instead he wishes to become the law maker as well as its enforcer.

  11. Submitted by Brian Simon on 06/01/2009 - 11:48 am.

    Spencer Gluekman writes
    “I may have missed the part where the Democrat dominated legislature had five months to come up with a balanced budget and failed to do so”

    You must have missed this sentence:

    “The governor signed virtually all of the DFL spending bills but vetoed the revenue bills that would have covered the costs”

    In other words, the Governor is trying that classic game of fiscal ‘conservatives’ where you cut revenue without cutting spending and everyone rejoices.

  12. Submitted by Bernice Vetsch on 06/01/2009 - 12:52 pm.

    If some Republican members of the legislature are “nervous” about letting the (or “a”) governor exercise the kind of power that King Tim plans, why in the world did they not vote to override his vetoes?

    Not all Republicans are in agreement with the Grover Norquist ideal of shrinking government until it is absolutely no good for anything. Many have real concern for those who will be hurt the most by his cuts. Loyalty to party should not override faithfulness to their duty to serve all Minnesotans to the best of their ability, not just ONE Minnesotan who happens to sit in a big chair.

    To whomever may bring a lawsuit against Pawlenty, please advertise the address to which those of us who are ANGRY at his assault upon the common good can send checks in support.

    I would suggest also a constitutional amendment limiting a governor’s terms to two; severely limiting his ability to unallot; and giving the legislature, as a co-equal branch of government, the right to call a special session.

  13. Submitted by TJ Pavey on 06/01/2009 - 01:15 pm.

    This is quite ridiculous. The Senate Bill was actually pretty lean and had a good plan for generating revenue. We already have one of the least subsidized (read highest in-state tuition) higher education programs in the country. Our K-12 program is also underfunded.

    The governor needs to stop thinking about his higher aspirations and do what is best for this state.

  14. Submitted by Thomas Swift on 06/01/2009 - 01:34 pm.

    I remember, back in 2003, after the Governor had refused to go along with the leftist plans for the usual yearly expansion of government spending and taxation, shocked Democrat legislators held constituent meetings; I attended one in St. Paul.

    What I hear today is strangely reminiscent of that meeting. I remember Sandy Pappas, Cy Thao and Carlos Mariani sitting behind a table taking turns assuring the audience that the end was neigh, and that bodies would soon be piling up in the streets.

    Funny, I don’t remember that actually happening.

    At the end of this year’s session, leaders of the Democrat legislature ran screaming from the capital and boarded a plane to whisk them to the far corners of the state. They were bringing the exact same message of “We’re as doomed as doomed can be!” that was being peddled in 2003.

    Excuse my lack of anxiety…but we’ve already danced to that tune.

    It’s all well and good for the DFL to pronounce a terminal diagnosis for us, but somehow I remain strangely confident that we’ll manage to pull ourselves through this mess with a minimum of carnage.

    I’ll be keeping my eyes peeled for any corpses lying around unattended, and should I discover any signs of the apocalypse, I’ll pass along the address for “happy to pay” leftists (those not already funding lawsuits) to send their relief checks.

  15. Submitted by Grace Kelly on 06/01/2009 - 02:01 pm.

    I suggested that the governor’s staff be cut and the governor works for free with no benefits. Think the governor will listen to me? Or will my input be ignorred or even deleted from the tallies?

  16. Submitted by Bookem Dann0 on 06/01/2009 - 10:20 pm.

    This truly is quite amazing, the Minnesota Legislature MAJORITY, can pass a balanced budget bill, and the great citizens of Minnesota get subjected to the TYRANNY of the MINORITY — Grand Obstructionist Party of NO. The famous Don “Veto” Pawlenti inflicting more job loss, unaffordable tuition, unaffordable health care, less police and firefighter security, less teachers and nurses. All so he can try to impress people like John Cornyn and Mitch McConnell. This is Democracy at its worst! Norm and Tim – “The Ambiguously Hypocritical Duo!!”

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