Pawlenty plan: federal funds and deep cuts Pioneer Press

Pawlenty plan: federal funds and deep cuts Pioneer Press
His budget-balancing act relies on combo of cuts, predicted federal aid
By Jason Hoppin
jhoppin@pioneerpress.com
Updated: 02/15/2010 11:08:17 PM CST

Minnesota Governor Tim Pawlenty (Pioneer Press file photo)

Gov. Tim Pawlenty released plans Monday to close a $1.2 billion state budget deficit, relying on hoped-for federal funding and further cuts to health care and welfare programs, and by proposing dramatic, long-term reductions to city and county aid that could reshape the way Minnesota's local governments do business.

In doing so, Pawlenty showed that, despite having wielded his budget ax several times since the economy tanked, it's as sharp as ever.

"These are challenging times," he said. "We have a historic drop in revenues. We have one of the more highly taxed states in the country. Adding more tax burden onto the state is not the way forward, so we have to live within our means, tighten our belts, do what everybody else is doing in this economy."

Pawlenty proposed $825 million in cuts, including $250 million in aid to local governments. And to cover the rest of the deficit, he penciled in $387 million in additional federal health care spending, even though Congress has not passed the aid.

About 20,000 adults without children on MinnesotaCare would lose health care coverage under the plan, and everyone from home health care providers for the disabled to hospitals would see cuts.

Pawlenty also called on the Legislature to make his 2009 unallotment budget cuts permanent. Combined with Monday's recommendations, that would reduce the projected $5.4 billion deficit in 2012-13 by nearly $3 billion, he said.

The cuts to local government aid and other
Advertisement

payments to cities and counties are bound to be controversial. Pawlenty proposes $250 million reductions in each of the next three years, dramatically shrinking a $2.1 billion program that sustains small towns and big cities alike by keeping local property taxes low.

St. Paul, for example, would take a $13 million cut under the budget. And if the city took similar cuts over the next two years, its budget would be reduced by 20 percent — absent any property tax hikes.

That's more than the city's parks and recreation, city attorney, human resources and city council budgets combined.

The news led to a warning from St. Paul Mayor Chris Coleman that the state's quality of life was at stake.

"It is now time for legislators from both parties to stand up and block the dangerous path to the bottom that the governor's budget proposal represents. Nothing short of Minnesota's future is at stake," Coleman said.

Advocates for the poor and disabled reacted to the proposal with frustration.

"My disappointment is that the last two years, we've been working very hard with the governor's own department to transform the system to make it much, much more effective. And he did not recognize that work," said Bruce Nelson, chief executive officer of ARRM, a disability rights advocacy group.

A state-run home for those suffering chemical or mental health issues, or for those with developmental disabilities or other ailments, would be closed. Which one has not been a determined, a spokeswoman for the Minnesota Department of Human Services said.

Counties also would be big losers. Ramsey County, for example, would see $19 million in state aid reduced to just under $300,000. Hennepin County's $34 million in aid would be eliminated.

Victoria Reinhardt, chairwoman of the Ramsey County Board of Commissioners, said the proposals would put more pressure on local property taxes. And cuts to human services, an area that accounts for half of the county budget, will affect property taxes as well.

"It's a double whammy," Reinhardt said.

To guard against huge property tax increases, Pawlenty said, the state should extend a current property tax cap.

Jim Miller, executive director of the League of Minnesota Cities, said the cut would mean big tax increases or dramatic cuts to services — or both.

State and national Democrats ridiculed the governor's reliance on $387 million of increased Medicaid payments to help balance the budget. Those payments first began under the stimulus package, and Pawlenty, who is exploring a run for president, has been a debt hawk and vocal critic of federal spending.

The Democratic National Committee called it "hypocrisy." Local Democrats were equally unsparing.

"Clearly there is a major gimmick in this proposal in that one-third of it depends on federal funds that have not been passed yet," Senate Majority Larry Pogemiller, DFL-Minneapolis, said.

Meanwhile, Republicans applauded Pawlenty for cutting the budget and sparing tax increases.

"Families all over the state are feeling the effects of the economy," said Senate Minority Leader David Senjem, R-Rochester. "As leaders in the Legislature, we must also act to slow the unsustainable growth by implementing budget cuts and reducing the overall cost of government."

Even with the federal aid, Pawlenty said, cuts would be deep. He predicted there would be layoffs.

"All of the private sector is experiencing layoffs, wage freezes, furloughs, terminations. So we're going to have some of that. We're going to strive to try to minimize it, obviously," Pawlenty said.

On average, state agencies would see budgets slashed 6 percent. A delayed $1.2 billion in state payments to schools would be further delayed.

Grants to help the working poor find child care would be cut. Payments to help fight HIV would be delayed. Some grants to help treat adults suffering from mental health issues would be cut, and treatment center hours reduced.

Though the Legislature does not usually deal with budget issues in even-numbered years, the supplemental budget was needed when state economists forecast a dramatic drop in revenues due to the recession. The DFL-controlled Legislature now takes up the proposals.

Pawlenty said he tried prioritizing the cuts, maintaining funds for public safety and K-12 education. While he has frequently expressed frustration with the cost of schools, he said he did not want those frustrations to affect children.

But House Majority Leader Tony Sertich, DFL-Chisolm, said that if Pawlenty thinks the budget doesn't affect public safety, then he is "flat-out lying."

Sertich said most local government spending goes toward police and fire departments, and that they are bound to suffer under cuts to local aid. Pawlenty has said cities should cut elsewhere rather than lay off police and firefighters.

Pawlenty also proposed a $9.5 million cut to the Department of Corrections and he's seeking an $14.7 million reduction in funding for courts across Minnesota.

In addition, he pushed his plan to slash corporate and capital gains taxes to help Minnesota's economy, including a 20 percent cut in the corporate tax rate and taxes for small businesses and a capital gains exclusion for qualified investments in small business.

"This is a spit in the ocean compared to what should be done," Pawlenty said, saying Minnesota's tax structure was out of step with the rest of the country.

The governor's proposal also eliminates the state's general assistance grants, which go to poor Minnesotans, often with no income, who get monthly payments up to $203.

Starting in December, a new program would provide grants to at-risk adults in crisis situations, while the smaller allowance would be retained for some, including those in battered women's shelters.

BALANCING ACT

Gov. Tim Pawlenty's plan to balance the budget includes $387 million in added federal Medicaid funding, plus these cuts: