Pawlenty budget plan eases up on cuts

Courtesy of a federal stimulus that he still dislikes, Gov. Tim Pawlenty was able Tuesday to bump up his proposed budget increase for K-12 schools and restore money for colleges and universities while holding off on proposed eligibility cuts in health care.

"In relative terms, the budget we're unveiling today contains some good news," Pawlenty said as he presented a revised version of his January proposal.

But underneath the good news lurk problems that will persist long after the stimulus money runs out, said DFL legislative leaders, who were quick to criticize Pawlenty for "masking" the state's budget woes with one-time money.

"It's easy to make the 2010-11 budget look good," said Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, by relying on $2.6 billion of one-time money delivered by a Democratic Congress and president. But once that runs out, Pogemiller said, Pawlenty's own attempt at a balanced budget for 2012-13 reveals deep cuts in local government aid and higher education and as much as a one-third cut in health care.

To increase funding for schools while dramatically cutting health care for the most vulnerable "is a cruel hoax on Minnesotans," Pogemiller said. "That's not shared sacrifice. That's not being fair."

Pawlenty contends that he is simply prioritizing his spending choices -- an approach he heartily recommended to DFLers, who he said were "unwise" to opt for across-the-board spending cuts.

"Our approach is prioritized," Pawlenty said. "Unlike our friends in the DFL, we're not proposing to cut K-12 [funding] but to increase it."

Revisions since January

Pawlenty's updated budget would spend $424 million of federal stimulus money on schools -- mostly on merit pay and student achievement. That would result in a $27 million increase from his January budget, which itself included a $156 million bump.

Pawlenty revised his January proposal in the wake of massive federal funds washing through the state and a deepening economic crisis. By tapping $2.6 billion in federal stimulus money and another $2 billion of one-time money that he has proposed through accounting shifts and a sale of bonds, Pawlenty was able to smooth over many of the rough spots in a budget some had feared would eviscerate basic services.

In Tuesday's proposal, Pawlenty would restore $304 million in cuts he had proposed to higher education and pass through a congressional increase in funding for student tuition aid. He also would exempt up to $2,400 in unemployment insurance benefits from state taxation for 2009.

Two significant changes come in public safety and health care. Pawlenty would have short-term offenders -- those who committed misdemeanors or gross misdemeanors that warrant six-month sentences or less -- to serve their time in state prison instead of local jails. The move, he said, would spare counties $8 million in expenses while closing off attempts to plea bargain in return for a local sentence.

Regarding health care, because of conditions for accepting federal stimulus funds, Pawlenty is barred for now from cutting eligibility for programs, something he proposed in January.

Pawlenty instead would save money by removing hospitalization as a benefit for Minnesota indigent people. The proposal would allow General Assistance Medical Care, a state-funded program, to offer limited outpatient care only. Intended to discourage emergency room use, the proposal would create a pool of funds that hospitals could tap to cover charity care. But unless they redirected patients to clinics, Health and Human Services Commissioner Cal Ludeman warned, hospitals would see losses in the "tens of millions" of dollars.

Beginning in January 2011, an estimated 113,000 Minnesotans would become ineligible for subsidized health care, and state spending for health care would be capped through 2013 at 2010 levels.

An earlier skirmish with the state courts that had Supreme Court Chief Justice Eric Magnuson warning of reduced court hours and limited prosecution of some types of cases appeared to result in a small win for the courts on Tuesday, with Pawlenty restoring $10 million of $25 million in cuts he had proposed in January.

'Not insurmountable'

Pawlenty said that while his budget approach differs greatly from that of DFLers, the differences are "not insurmountable."

But he had little good to say about DFL proposals that would preserve health care eligibility, cut school funding and raise taxes.

Raising income taxes by an estimated $2 billion, as one Senate plan does, would result in a top rate of 12 percent, Pawlenty said, and would reach down as far as $65,000 for a single wage-earner. Pogemiller challenged that assertion and said that the Senate would not raise income taxes by that amount.

Pawlenty was similarly critical of a DFL House plan that would strip most credits and deductions from the tax code, saying it would "hit a big slice of Minnesota."

The governor's budget sets the stage for a protracted battle with the DFL-controlled House and Senate over how to close the state's projected $4.5 billion deficit and right an economy that is shedding jobs daily.

DFLers signaled that the gap to be bridged with the Republican governor over the remaining two months of the legislative session is wide.

"We don't think this budget is balanced," said House Speaker Margaret Anderson Kelliher, DFL-Minneapolis. DFLers bristled at Pawlenty's early critique of plans that have yet to be fully shaped.

House DFLers are set to release a budget outline Friday, with proposals for higher taxes expected. The Senate plan, Pogemiller said, will rely on neither the accounting shifts nor borrowing proposals embedded in Pawlenty's budget. "We need honest budgeting," Pogemiller said.

Patricia Lopez • 651-222-1288