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Gov. Tim Pawlenty explains how he decided to cut nearly $2.7 billion in state spending, an attempt to balance the state budget. With him is Commissioner Tom Hanson of Minnesota Management and Budget. Don Davis/Minn. State Capitol Bureau

Pawlenty lays out his budget cuts

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ST. PAUL - Gov. Tim Pawlenty announced Minnesota's largest-ever budget cut Tuesday, reducing state aid to local governments, lowering health-care funding, trimming state college budgets and, in general, shrinking the size of state government.

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Pawlenty's cuts equal nearly $736 million, which along with a $1.8 billion delay in state payments to schools make up most of the $2.7 billion he needed to balance the state budget.

Lawmakers a month ago passed, and Pawlenty signed, a budget that would have spent almost $33 billion in the next two years. However, Republicans rejected a tax increase passed by the Democratic-controlled Legislature, leaving little more than $31 billion in revenue to pay the state's bills. Pawlenty said that left him no choice but to unilaterally cut spending.

While the biggest portion of Tuesday's budget-balancing action was delaying $1.8 billion in state payments to school districts, Pawlenty said that in the long run schools will get all the money due them. School classroom spending would not be affected, he added.

He plans to cut $300 million out of $1 billion state aid local governments had planned to receive, a proposal city and county leaders say will force up local property taxes.

The governor also would trim $236 million from a variety of health programs. That comes from $9.3 billion the state planned to spend on health programs, mostly for poor Minnesotans.

His plan would slice $100 million from $3 billion state colleges and universities had expected.

Most state agencies would be cut another 2.25 percent, beyond a Legislature-passed 5 percent cut, which will force an unknown number of state workers out of their jobs.

The governor Tuesday announced his plans to balance the budget, but the actual cuts will not occur until the new budget begins on July 1. He said he could make changes before taking final action.

Pawlenty repeated his oft-stated concept that since families are financially hurting and being forced to cut back, government should do the same during the current recession.

"The overall impact of these reductions will be to have state government live on about 96 or 97 percent of what it's living on right now," he said. "The impact will be felt, but we will get through this difficult economic period and position Minnesota for future growth by reining in government spending and keeping our state competitive."

Democrats said tens of thousands of jobs will be lost under the Pawlenty plan and cuts overall are closer to 10 percent of the state budget. They also said the plan, known as unallotment, will leave the state with a fiscal hole of about $5 billion when a new budget cycle begins July 1, 2011.

Other than North Dakota and Texas, which boast surpluses, most states are facing deficits and making cuts to balance their budgets.

The governor was especially harsh on city leaders, saying they need to trim their budgets, without hurting police and fire protection. He said their budgets, many of which are larger than a year ago, are "very much different than the realities around them."

Wadena Mayor Wayne Wolden, Coalition of Greater Minnesota Cities president, predicted the local government aid cuts will lead to higher property taxes to support communities.

"The governor's cuts are wrong, and it's time for state leaders - both Republicans and Democrats - to put their residents first and prioritize funding for safe, affordable communities," Wolden said. "They need to speak out against the governor's cuts now."

The Republican governor said the five Minnesota counties with fewer than 5,000 residents (Kittson, Lake of the Woods, Mahnomen, Red Lake and Traverse) would be spared aid cuts, as would poor cities smaller than 1,000.

Local government aid cuts will be larger in the year beginning July 1, 2010, than for the first year of the budget. Pawlenty said that will give government officials more time to prepare for a trimmer budget.

Pawlenty cut his own office's budget, but not other statewide elected officials or the Legislature. However, he urged them to make their own reductions.

He said that so far his staff has not figured out how many state employees need to be laid off. However, the state's largest government employee union - the American Federation of State, County and Municipal Employees - estimated that 3,400 workers at all level of government would lose jobs.

Assistant Senate Majority Leader Tarryl Clark, DFL-St. Cloud, said that she fears "tens of thousands" of private and public Minnesota employees will be out of work due to Pawlenty's actions.

Many of those job losses, she said, would come from Pawlenty's health-care cuts. Despite Pawlenty's claim that nursing homes would feel little impact and hospitals would be affected less than expected, Clark claimed they would feel the pinch.

The law Pawlenty is using to unallot was written in 1939 to give governors authority to make cuts when it appears revenues are falling short of expectations.

The governor asserts he is on firm legal ground, but organizations ranging from those representing hospitals to state worker unions are looking into whether to sue Pawlenty over the cuts.

"These are problematic," said Jim Monroe, executive director of the Minnesota Association of Professional Employees, the state's second largest union.

Middle class Minnesotans may not immediately see an unallotment impact, Monroe said. However, that will change when a family's son gets hurt at a sports event and discovers the local hospital emergency room full because of health and human services unallotments.

"That's when it is going to hit," Monroe said.

Among Pawlenty's other proposed cuts are:

  • Ending a state program to provide childless adults health care less than two months before it already was scheduled to end.
  • Eliminating a state refund for political contributions to save $10.4 million. Pawlenty said politicians should "not be subsidized."
  • Reducing payments for mental health, chemical dependency, child support enforcement and other health and humans services programs. One of the biggest cuts is $39 million that would have gone to counties to provide children social services.
  • Ending state grants for low-income and disabled people to receive basic emergency needs, such as housing. Pawlenty said federal funds will replace state money.
  • Reducing a refund renters receive as an equivalent to property tax refunds sent to homeowners.
  • Lowering the maximum hours personal care attendants can work from 310 hours per month to 275.
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Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.
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