Editorial: Deal didn't end state's money woes

  • Updated: May 17, 2010 - 6:04 PM

One-time measures guarantee a big state deficit in 2011.

The 2010 Legislature and Gov. Tim Pawlenty found just enough bipartisan agreement to avert a fiscal calamity for state government. Though it took a rare overnight special session to finish the job, a $3 billion gap in the half-spent, $31 billion biennial state budget was closed before adjournment Monday morning.

Pawlenty boasted that the agreement was the culmination of a historic change of course for Minnesota on his watch. The 2010-11 state budget is 10 percent smaller than the previous one, he said. But the Republican governor couldn't claim that he and the Legislature had stabilized state finances beyond June 2011. They did not.

The deal they assembled features payment delays to schools and business taxpayers totaling $2.2 billion, more than two-thirds of the gap to be closed. One-time cuts in spending, most of them identical to cuts Pawlenty made via unallotment in 2009, did much of the rest of the job. DFLers lacked the votes to replace a portion of those cuts with higher taxes, but they refused to allow Pawlenty's choices to outlast his term.

The result: Another wide gap between projected revenues and expenditures, likely $5 billion or more, will confront the Legislature and new governor when they take office next January. A bigger bite out of the future deficit this year would have served Minnesota better.

The way the Republican governor and DFL legislative leaders described the budget deal's virtues was telling. Each side congratulated itself for avoiding unpopular budget-balancing options. In so doing, they were also unwittingly compiling a list of measures their successors will likely be compelled to consider to correct a problem they largely booted down the road.

The bill did not raise state taxes, Pawlenty said. (But it almost certainly raises property taxes, which a Minnesota 2020 analysis says have climbed 73 percent statewide between 2002 and 2010.) It did not cut schools or nursing homes, DFLers said. (But it increased the school payment delay Pawlenty imposed last year from $1.7 billion to $1.9 billion, and offered only a claim against any future state surpluses to put the payments back on schedule.)

The agreement's most disappointing omission was its failure to seize an opportunity presented by the new federal health reform law to bring $1.4 billion in new money to Minnesota in the next three years.

That much was available for moving 100,000 of the state's poorest citizens from state-funded health care programs to Medicaid, a 43-year-old program financed with a 50-50 state-federal match. The move had much to recommend it: the creation or preservation of an estimated 21,000 private-sector health care jobs; improved access to health care services for a needy population; a reduction in the uncompensated care costs that are often passed on to people with private insurance, and an ability to apply cost-containment strategies to a bigger share of the health care market.

To make the switch to Medicaid, Minnesota's costs for the affected population would have increased $188 million over three years. But DFLers proposed offsetting cuts and a system of surcharges and rebates that would have brought the net cost to zero.

Their offer ought to have been seen as too good to pass up. But Republicans rejected the move as, in the words of GOP gubernatorial candidate Tom Emmer, "opting into Obamacare." The budget agreement reduced the Medicaid switch to an option Pawlenty or his successor could choose to exercise by Jan. 15, 2011.

Two candidates for governor, DFL House Speaker Margaret Anderson Kelliher and Independence Party endorsee Tom Horner, said Monday that they would exercise the Medicaid option if elected. Emmer said he would not.

The legislative session may be over. But this year's partisan tussle over where Minnesota should go from here is only beginning. Candidates begin filing for the November ballot today.

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