Pawlenty cuts deep to balance budget

  • Article by: BAIRD HELGESON and R ACHEL E. STASSEN-BERGER , Star Tribune staff writers
  • Updated: February 16, 2010 - 7:37 AM

Money for social services and aid to local governments would be slashed. But business would see tax cuts.

Gov. Tim Pawlenty's budget is bad news for low-income Minnesotans who rely on state health care and for mayors already struggling to balance their own budgets, but good news for corporations paying high taxes.

The plan, released Monday, would erase a $1.2 billion state deficit largely through deep cuts in aid to local governments, in funding for health and human services and with an average 6 percent across-the-board cut to state agencies, likely to result in layoffs. Nearly one-third of the governor's budget fix would rely on $387 million in federal stimulus money. That money isn't yet in the bank and, if it doesn't come through, the cuts could be far deeper.

Pawlenty also proposed corporate and small-business tax cuts. The cost -- and benefit -- of those reductions wouldn't fully materialize until after he leaves office next year.

"This is a spit in the ocean compared to what should be done," Pawlenty said at a Capitol news conference announcing his proposals.

The governor spared programs for the military, veterans, state public safety and K-12 classroom education. But the cuts he called for dug deep into state government, including the governor's office, the judiciary and the Legislature.

The proposal starts what is expected to be a fierce budget battle between a DFL-controlled Legislature and a lame-duck Republican governor trying to use his folksy brand of fiscal conservatism to launch him to the national stage.

Democrats criticized Pawlenty for using the federal stimulus funds he has bashed and for not balancing the budget solely through cuts, as he had pledged.

House Majority Leader Tony Sertich, DFL-Chisholm, said the governor is "flat-out lying" in saying he's not cutting public safety, because his proposal would cut the aid that cities depend on to keep their firefighters and cops paid.

The proposal slices $347 million from health and human services programs. It would end or alter health care coverage for about 40,000 Minnesotans.

From the state's largest cities to its smallest burgs, the reaction to Pawlenty's proposal to cut $250 million in aid to local governments was the same: This will be devastating.

"This is a reckless proposal" that means fewer snowplows, fewer police and closed parks, libraries and pools, said Cloquet Mayor Bruce Ahlgren.

Minneapolis Mayor R.T. Rybak was equally blunt. "It will not be pretty," said Rybak, who is running for governor. Cities do need to share the sacrifice, he said. But if he were governor, Rybak said, he would accompany cuts with tools for reform.

Pawlenty said his proposed cut, plus cuts he put in place last year, equal about a 25 percent reduction in state aids to cities in recent years.

The state's largest county, Hennepin, is slated for $31 million in state aid cuts this year.

County Board Chairman Mike Opat said those would be likely to result in more layoffs and program cuts. "We're beyond being surprised at this point," Opat said.

Higher education

Pawlenty proposed cutting $47 million from higher education, although he said he'd have liked to cut more.

"They got off relatively very easy here," Pawlenty said. "Because of the way federal law works, this is the most we could cut them."

His proposal reduces the University of Minnesota's funding by $36.1 million and Minnesota State Colleges and Universities by $10.5 million -- which would put them back at 2006 levels.

The U has already cropped its budget and shed more than 500 full-time positions in the past year. Furloughs, or unpaid days off, are now "being strongly considered," said CFO Richard Pfutzenreuter.

Tax cuts

Along with funding cuts, the governor's proposal includes a 20 percent reduction in the corporate tax rate. That would cost the state $10 million through next year and $150 million in the following two years.

He also is seeking a 20 percent reduction in small-business taxes, which would cost the state $118 million in fiscal years 2012 and 2013.

"We are not out of balance in terms of the qualities of our amenities -- our arts, our culture, our education and many other measurements," Pawlenty said. "We are definitely out of balance when it comes to our tax climate, our business climate and our job climate."

DFL legislators criticized him for putting off the costs of the tax cuts until after he is out of office.

Next step

Legislators will now dissect Pawlenty's plan and come back with their own budget-balancing proposal. The governor and the Legislature will have a more current look at the state's financial picture in early March, when the state releases its next financial forecast.

The budget news hasn't been good for a while. Last summer, after the Legislature and the governor failed to reach agreement for erasing a multibillion-dollar deficit, Pawlenty unilaterally cut $2.7 billion through an authority known as unallotment.

Pawlenty is now fighting in the Minnesota Supreme Court to keep those cuts. If the court rules against him, the governor and legislators could be left to trim another $2.7 billion.

Even with his previous cuts in question, Pawlenty didn't rule out more solo reductions.

"We'll use that as a last resort," he said.

Staff writers Jenna Ross, Kevin Duchschere and Chris Havens contributed to this report.

Baird Helgeson • 651-222-1288 Rachel E. Stassen-Berger • 651-292-0164

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