Education gets a boost under Pawlenty's budget proposal

Flush with a projected surplus for the first time since taking office, Gov. Tim Pawlenty proposed a two-year budget Monday that would boost state spending by nearly $3 billion -- a 9.3 percent increase.

Education would get about half the increase, with K-12 schools snagging the biggest chunk.

Others would benefit, too. Universities and colleges, health-care providers, nursing homes, homeowners, environment and veterans all would get a boost.

But much of the money comes with strings attached. About $1 billion of new spending would go out the door as performance pay -- one-time bonuses tied to specific state-set goals.

"We have a government culture that continues to measure success by inputs," Pawlenty said. "We want to measure results. Is the money accomplishing the stated objective?"

K-12 schools, for instance, would get a 4 percent increase over two years. But a second 4 percent boost would hinge on meeting Pawlenty's performance goals.

Similarly, nursing homes would see a 4 percent increase over two years, but only if they meet performance goals. Those that fall short would get 3 percent.

The state's universities and colleges would have an extra $50 million riding on goal achievement. A scholarship program for high school students would offer money for college, but only if the student successfully completes college courses while still in high school.

Legislative leaders in the DFL-controlled House and Senate offered a cautious appraisal of Pawlenty's budget plan, saying that it offered "no leadership" on transportation, did not come close to covering the state's 80,000 children who lack health care and gave too little to property tax relief.

His plan would offer $148 million in property tax relief, slowing property tax increases for mid- and low-value homes and adding to local government aid.

House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, said that falls short, as does the absence of any money for all-day kindergarten, a DFL priority.

Pawlenty proposed $29 million for preschool, giving very low-income youngsters a $4,000 voucher to attend a certified kindergarten readiness program.

GOP criticism harsher

The sharpest criticism, however, came not from DFLers but from Pawlenty's own party.

House Minority Leader Marty Seifert, R-Marshall, said the surplus could have yielded $1 billion in tax relief for Minnesotans, rather than the $281 million recommended by Pawlenty.

David Strom, president of the Taxpayers League, a group that espouses a philosophy of fiscal conservatism, said the scope of the budget "took my breath away." The 9.3 percent spending increase "isn't just generous," Strom said, "it's knocking on the door of spendthrift."

And while Pawlenty does hold his budget increase under 10 percent overall, two areas of the budget stray well into the double-digit zone. Under his proposal, health and human service spending would rise nearly 19 percent over the 2006-07 budget period, while higher-ed spending would go up 16.4 percent.

That's due in large part to the $1 billion in ongoing spending required under current law. Just to accommodate increasing caseloads, health and human services requires nearly $1 billion before anything new is added.

The projected surplus gives Pawlenty an additional $2.1 billion for new spending.

"Pipe down"

Anticipating his critics, Pawlenty took a moment during his budget address to offer a Goldilocks-style defense. Those on the left, he said, would accuse him of spending too little. Those on the right would say he spent too much.

"I think it's about right," Pawlenty said. And in a flash of the feistier style of earlier years, he added that interest groups who wanted still more should "pipe down and be satisfied."

Pawlenty's budget plan calls for no new taxes and $1.7 billion in state borrowing for road projects. It also would rebuild state budget reserves, boost local police forces and State Patrol numbers, offer help for the homeless and water quality and increase preparedness for pandemic flu.

In keeping with his emphasis on innovation, Pawlenty also offered energy-related grants to fuel development of bioenergy projects.

His budget plan also offers special recognition to veterans, with an expansive, $75 million package that would exempt military pay and pensions from state income taxes, offer vets and their dependents up to $10,000 each in tuition benefits and establish a reintegration program to ease the transition back into civilian life.

The military exemption constitutes the sole individual income tax relief in the governor's plan.

Asked whether the benefits would be sustainable, Pawlenty in turn asked, "Who should be first in line" before the state's servicemen and women? "We better have as a priority for the session a generous and robust veterans package," he said. "Those folks deserve it."

Differences apparent

Despite early talk of bipartisan cooperation, clear differences began to emerge Monday.

The Republican governor has focused his budget on an effort to remake Minnesota high schools, which he calls "obsolete." The DFL-led Legislature wants education resources directed to the other end: all-day kindergarten and subsidized preschool.

On health care, Pawlenty has offered a complex plan to separate MinnesotaCare into two classes and create a nonprofit, fee-fueled agency to oversee the sale of all individual insurance policies in the state.

DFLers have said they prefer to focus on expanding coverage to uninsured children and increasing affordability for those who have coverage.

Also debate is building over the amount of surplus available. Although the official forecast amount is $2.17 billion, that does not factor in inflation, which would have cut that amount by nearly half. The remaining $1 billion is mostly one-time money that would not cover ongoing expenditures.

As Pawlenty unveiled his budget, a bill requiring that inflation be counted in state economic forecasts got preliminary passage in the DFL-led Senate on a party-line vote with final passage due later this week.

Pawlenty has said he opposes the measure because he doesn't want state spending to increase "on autopilot."

The budget recommendations set the stage for serious shaping of the state's two-year budget, with the next milestone coming at the end of February, when the economic forecast will fine-tune revenue projections.

Staff writers Conrad deFiebre, Norm Draper and Dane Smith contributed to this report.

Patricia Lopez • 651-222-1288 • plopez@startribune.com