In what is only a first installment on budget pain yet to come, Gov. Tim Pawlenty on Friday cut $271 million in state spending, mainly in payments to cities, counties, human services programs, and colleges and universities in an attempt to wipe out the state's growing deficit.
With revenues plummeting at every turn, Minnesota faces a $426 million budget deficit for the reminder of this fiscal year, which ends in June, and a $4.8 billion shortfall for 2010-11.
Friday's emergency cuts will take immediate effect and will temporarily wipe out the short-term deficit, although Pawlenty was quick to note that a second round of reductions may be needed early next year.
"Our country and our state are facing historic financial challenges ... and it's going to require difficult decisions," Pawlenty said as he announced the cuts. "Families across Minnesota are tightening their belts, and they expect government to do the same."
To protect K-12 schools, the state's single-largest spending item, Pawlenty cut more deeply from local government, health care and higher education -- unappetizing choices, he noted, but necessary in the face of an economic situation that continues to worsen.
Pawlenty described the cuts as "modest" and said that despite what critics may say, there should be no need to cut into essential police and fire services. In not-so-veiled references to Minneapolis and St. Paul, Pawlenty said that so long as cities maintained their own human rights departments and cultural community liaisons, they had places to cut before touching basic services.
Local government will feel the effect quickest, in the form of shrunken state aid checks that had been due to go out the day after Christmas. Cities will lose $66 million, while counties will be short $44 million.
Cities under 1,000 population and counties with fewer than 5,000 residents are exempt from this round of cuts because they are too economically fragile to handle such sudden revenue losses, the administration said.
Budget reserve wiped out
Pawlenty's action wipes out the state's $155 million budget reserve -- a move that is required by law before he can make unilateral cuts, known as "unallotments."
Typically, budget matters are the prerogative of the Legislature, with the governor either signing or vetoing proposals legislators have passed.
But the law allows the governor to cut the budget on his own authority if the state faces a deficit and if the reserve has been completely spent down first.
Pawlenty's cuts will take effect without further review.
Health and human services programs will see $73 million in reductions, although direct care should remain unaffected. Most of the cuts come in medical training expenses and payments to hospitals.
The University of Minnesota and Minnesota State Colleges and Universities each will lose $20 million in state funding. State agencies will give up $40 million, about 10 percent, while the Legislature volunteered to trim its costs by $2.2 million.
The state is grappling with a two-stage budget shortfall, and as painful as Friday's cuts are, they do nothing to close the gaping $4.8 billion budget hole for 2010-11.
House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, said that the unallotments were a "blunt instrument" and that legislators would have to work on a more nuanced, long-term approach to the state's fiscal woes.
Kelliher said she gave Pawlenty "high marks" for a hurried series of meetings in recent days that have included cities, counties, health care leaders and others who might be affected.
Pawlenty had also met privately with Kelliher and Sen. Majority Leader Larry Pogemiller, DFL-Minneapolis, in a session that produced an exchange of ideas but no negotiated agreement on how to proceed.
That lack of agreement stems, in part, from three different views on how to close the immediate revenue gap.
Senate DFL leaders offered an across-the-board 1.6 percent cut to unspent state funds, which would have cut $110 million from K-12 schools, something both House DFL leaders and Pawlenty said was unacceptable.
Governor urged to prioritize
House DFLers urged Pawlenty to prioritize budget cuts and to protect not only education but also health care and local government aid, which would have effectively removed most of the state's budget from consideration.
In a letter to legislative leaders on Thursday, Pawlenty said the Senate approach would not reflect his own preference for priority budgeting, while the House directives shielded too much of the budget.
Kelliher said she knows that little will be protected in the coming months.
"The hard choices are just beginning," she said.
Patricia Lopez • 651-222-1288