Minnesota’s deficit numbers were as bad as expected. But what was a little surprising was the rough treatment Gov. Tim Pawlenty received from the usually mild-mannered press corps Wednesday afternoon.
Start with the numbers, which were delivered by Tom Hanson, the state’s finance commissioner who has become used to announcing bad news.
Just five months into the current biennium (2010-11), the state’s budget already is showing a likely deficit of $1.2 billion. The main problem: state income tax collections, which cover 70 percent of the cost of government, are lagging far behind projections and that’s because of the brutal combination of high unemployment and, more surprisingly, lower wages among those people who do have jobs.
Wages have fallen roughly 4 percent in Minnesota, a decline that far exceeds projections made last February.
These bleak numbers on this bleak December day were greeted with expected responses.
The governor says Minnesota government must cut costs. He said he’d work with the Legislature at getting this new budget back into balance, but he repeated old refrains: “No tax increases… government must learn to live within its means… we must improve the business climate.”
Interesting aside, here: One of the few areas of black ink on the dizzying array of charts and graphs being shown Wednesday was receipts from corporate income taxes. Corporations actually appear to be weathering hard times quite nicely. The amount of taxes collected from the corporate income tax was slightly higher than forecast.
State economist Tom Stinson pointed out the reasons for that: Corporations are making money by reducing workforce and lower wages.
“That’s not businesses doing well,” Pawlenty said of the relatively healthy bottom lines of business as opposed to the bottom lines of working people. “It’s just business cutting costs. It’s not a sustainable model.”
Pawlenty has become adept at racing through the negative numbers over the years. Typically, he blames a bad national economy, the DFL, promises better days ahead and gets out of the room with a wink and a smile.
But Wednesday reporters weren’t quite so easy on the genial governor.
They kept asking him questions about whether he should spend more time selling Minnesota and less time zipping around the country promoting himself as a possible Republican Party presidential candidate three years from now.
One reporter asked him whether he should be more like Rudy Perpich, who constantly was on the road in search of companies looking to do business in Minnesota.
“Saturday I’m going on a trade mission to South America,” the governor responded. “This needs to be a place where businesses want to stay, to come and grow.”
He smiled a little, looked around the room in search of a different question; a different topic.
But the topic didn’t change. There was another question about whether he should be staying at home more instead of running for president.
“You know I’m not doing that,” he said, without a smile this time. He added that he didn’t know what he’d be doing in 2011.
He waited for another question that could get him back to his usual talking points.
It didn’t come. Instead there was more about his schedule.
“The work here [in the governor’s office] is getting done,” he said, a little testy. “…The measure is whether you get the work done.”
He looked for a question that would get him back to his talking points about reducing the cost of government.
Instead, he got a question about his legacy. His seven years in office have been marked by budget deficits piled upon deficits. Bad as the current budget is, the budget forecast is far, far worse. It shows that the deficit will blow up to more than $5 billion because the one-time federal stimulus money won’t be coming down the pipeline.
Clearly, the governor was offended by the implication that the budget had gone south under his watch.
“This situation here mirrors what’s happening elsewhere,” said Pawlenty, noting that Democratic governors, such as Wisconsin’s Jim Doyle, are facing the same deficit woes that Pawlenty and Minnesota are facing.
As for the out-year budget, that’s really not as bad as it seems, Pawlenty said. If school shift payments are delayed, if his $2.7 billion in unallotments from last June are made permanent and there are more cuts in government, the out-budget deficit would “more likely be $2 billion.”
Pawlenty was finally able to extricate himself from the room with a couple of softball questions about the Minnesota National Guard and whether it would be facing more call-ups in the future.
The governor implied that he’s in pretty regular contact with the Department of Defense and that there likely will be more Minnesota troops headed to war zones but he wasn’t just ready to announce that yet.
All of this testiness showed that Pawlenty is in for a lot of lumps in his final year in office. But he also made it clear that he’s not backing down.
Asked if he’ll use unallotment again or try to work with the Legislature to solve the newest budget crisis, he said he has “a responsibility to the Legislature.”
But in the next breath, he painted a great big target on the next installment of local government aid money — some $400 million — that’s supposed to go to cash starved cities and counties at the end of this month. It appears almost certain he’ll unallot much of that money.
He expressed frustration with k-12 spending, noting that some districts seem to be giving teachers raises. He “will do a little investigation into where they’re getting that money.”
Despite the fact that he’s already whacked a program that provided medical care for the poor, there has to be more cutting done in the areas of medical costs, he said.
Opponents weigh in
Meantime, of course, opponents are foaming at the mouth, ready to swing at the lame duck.
Rep. Tom Huntley, DFL-Duluth, chair of the House health and human services finances committee, was attacking the governor on health care funding.
“It comes as no surprise that the Minnesota Care fund in going broke,” Huntley said in a statement. “This responsible path to providing health care for working Minnesotans has been under attack from the governor from Day One. From raiding the fund to help balance the budget to recently shifting close to 30,000 of the poorest and sickest non-working Minnesotans into MinnesotaCare, his polices have hastened its demise.”
Then, Huntley fired the unkindest cut of all. He compared Pawlenty — unfavorably — with former Alaska Gov. Sarah Palin.
“At least Sarah Palin told the people of Alaska she was quitting as their governor,” Huntley said. “Tim Pawlenty quit on Minnesota a long time ago and working familes are paying the price.”
DFL legislative leaders were a little gentler. But it’s clear both they and the governor are in the same places they’ve been for the last seven years.
Pawlenty insists on no tax increases. The legislative leaders were calling for a combination of cuts, reforms and “new revenues” (taxes).
Mostly it was the same old grim story Minnesotans have become accustomed to.
Drs. Gloom and Doom
How grim was it?
The good news was coming from two people known as Dr. Gloom and Dr. Doom. Gloom is Stinson, the state economist. Doom is Tom Gillaspy, the state’s demographer.
Stinson/Gloom said the recession appears to be over.
But even that good news comes with a big dark cloud over it. Unemployment and wages will continue to flounder, he said. Employment won’t start picking up until the spring — and much of that employment boost will come via the Census, which will employ about 8,000 workers in temp jobs. Those jobs will pay more than the minimum wage.
Elsewhere, Stinson/Gloom expects some growth in the home construction business and manufacturing “will not continue to hemorrhage.”
“We’re gradually climbing out of a deep hole,” said Stinson/Gloom. But that, too, came with a caveat. The lower wages won’t snap back. Instead, they become the new base for what working people will be paid.
Gillaspy/Doom said that “Minnesota has a lot going for it relative to other places.” He noted that the state’s 7.6 unemployment rate is dramatically better than the national rate and it’s ratio of people working to unemployed is “one of the highest in the country.”
But Minnesota is in a relatively good spot, Gillaspy/Doom said, because it’s invested heavily in education in the past.
“The challenge will be to maintain our advantages,” he said.
Doug Grow writes about public affairs, state politics and other topics. He can be reached at dgrow [at] minnpost [dot] com.