Balanced Minnesota budget is still a long way off

Nearly halfway through the legislative session, lawmakers are nowhere close to balancing the state budget.

DFL Gov. Mark Dayton continues to push for his tax plan, saying more revenue is needed to avoid deep cuts to important services. But Republicans say tax increases could threaten the state's still fragile recovery.

With a projected deficit of $5 billion, even the most optimistic view of the politically palatable budget cuts and shifts on the table leaves a $1 billion to $2 billion gap that so far has been unbridgeable.

States facing similar shortfalls are considering education cuts so steep that residents must confront long-held beliefs about the nature and importance of public schools. In Wisconsin, Gov. Scott Walker has asked to cut schools by $1 billion. Texas officials are pushing for education cuts far more severe, causing districts to consider closing newly built schools, slash staff and even sell advertising on school mascots and buses.

Unless some unforeseen budget magic appears, Minnesota could be on the same grim path.

Balancing the budget "is the most important thing we do this session," said Deputy Majority Leader Geoff Michel, R-Edina. "It's job 1, job 2 and job 3."

The newly elected governor unveiled his budget proposal about two weeks ago, a mix of cuts, shifts and tax increases on high earners that even Dayton admitted was tough to support. Republicans dismissed the outline immediately, saying it would poison the state's sputtering economy.

How hard is it to close a $5 billion shortfall through cuts alone, as Republicans have pledged? If they delay repaying money owed to K-12 schools, that gets them $1.4 billion. Adding in reductions Dayton already vetoed, largely a mix of trims to local government aid and health care, pares off another $900 million. Reducing state agencies one-fifth of their budgets would get another $360 million. Eliminating a bunch of special tax breaks could wring out $400 million.

Add all that up and the gap would still be a nearly $2 billion deficit. Ending all funding for public safety and closing every state agency would barely fill that hole.

At the same time, many committee chairs are trying desperately to protect the agencies they oversee. Several Republican committee chairs said they are hopeful they won't have to cut as deeply as others.

"In a time of decline, we have to go back and fortify our core functions, which is courts, the Department of Public Safety and corrections," said Sen. Warren Limmer, R-Maple Grove, chairman of the Senate Judiciary and Public Safety Committee.

Limmer said he's "cautiously optimistic" that cuts to his area "may not be anywhere near what everybody else is getting."

Schools and health care

The state's two biggest spending areas are K-12 schools and health care. Together, the two make up nearly 70 percent of the state's general fund budget.

Balancing the budget without additional revenue means taking a hard look at both.

To do that, fat-seeking legislators must navigate vast and complex agencies with a maddening menu of programs and services that are fused together with arcane funding formulas, myriad regulations and federal strings. DFLers, for instance, say legislators can't cut more than another $400 million from health and human services without jeopardizing crucial federal aid.

On the education side, Republicans will also brush up against another hard reality: No governor in modern times has ever made deep cuts to K-12 schools, which both parties say is vital to the state's future success.

That leaves health and human services, which could face cuts of far more than $1 billion.

Sen. David Hann, R-Eden Prairie, who chairs the Senate Health and Human Services Committee, anticipates reductions to his areas, but he declined to say where and how deep. His goal, he said, is to make reforms that result in long-term savings.

DFLers say the new Republican majority is withering under the pressure to produce a budget that grooves with their "live-within-your-means" campaign pledge.

"The math doesn't work," said Rep. Ryan Winkler, DFL-Golden Valley. "The all-cuts budget doesn't work."

Several DFLers say they suspect Republicans are delaying the release of their budget and tightening committee deadlines to minimize bruising public hearings.

Typically, major changes to the budget are preceded by layers of committee hearings where those affected can testify about a) how much more could be done with additional money or b) how badly any cuts would jeopardize services.

Republicans are feeling added heat from within their own party. Minnesota Republican Party Chairman Tony Sutton sent a letter to legislators recently saying it would violate party principles to balance the budget with new taxes, fees or gambling revenue.

Hann is not convinced that will entirely hold by the time legislators adjourn May 23.

In the final hours of the session, legislators could be left with a stomach-churning choice: Cut education money or raise revenue though taxes, surcharges or expanded gambling.

"What we believe is that the public does not expect a higher tax burden in a fragile economy," said Hann. "We believe we are going to prevail in that argument, at least if not entirely, at least enough to satisfy our principles."