Gov. Tim Pawlenty uses a tub of one-time dollars, spending cuts, closing a corporate loophole and other stratagems to fill a $935 million state budget deficit projected for this spending cycle.

"We can do this," Pawlenty said of the America regaining its economic feet.

Gov. Tim Pawlenty on Friday (March 7) presented his budget balancing plan at a Capitol press conference, one using one-time dollars, budget cuts and other means to eliminate the projected $935 millon state budget deficit. The governor's proposal, which includes a statewide state sales tax cut, promises to hold K-12 classrooms harmless but nip at state agency budgets up to four percent. (Photo by T.W. Budig, ECM Capitol Reporter)

by T.W. Budig
ECM Capitol reporter

Gov. Tim Pawlenty uses a tub of one-time dollars, spending cuts, closing a corporate loophole and other stratagems to fill a $935 million state budget deficit projected for this spending cycle.

"We can do this," Pawlenty said of the America regaining its economic feet.

"We hope they (Minnesota Democrats) join us," he said Friday (March 7) in working out a budget solution.

Some $592 million of the Pawlenty solution comes in the form of one-time dollars - he taps the state budget reserve for $250 million and withdraws another $250 million out of the state's health care access fund to soften budget cuts to Human Services.

"It's a rainy day fund," said Pawlenty said of the budget reserve. "And it's raining."

The access fund shift, explained Pawlenty, will ensure that people are not kicked off programs like MinnesotaCare, the state's health insurance plan.

Gov. Tim Pawlenty outlines his budget-saving plan including a sales tax reduction.

But Human Services budget cuts will negate proposed expansions in eligibility to some state programs, Pawlenty explained.

Pawlenty looks to close perceived loopholes in state tax law dealing with companies with offshore asset (FOC) to wring an additional $100 million this spending cycle.

Also in last year's proposal

The FOC proposal, which adopts Internal Revenue Service tax definitions, was contained in last year's tax bill that Pawlenty vetoed.

In terms of budget cuts, Pawlenty snips four percent or less from the various agencies of state government, amassing about $341 million in savings this spending cycle.

Some state agency budgets, such as the Department of Corrections, are lightly touched.

Others, such as the vast human services budget, receive four percent cuts.

While K-12 classroom funding was spared, about $54 million in higher education spending - the sum equally split between the University of Minnesota and Minnesota State College and Universities - was cut this spending cycle.

Pawlenty couched the cuts by explaining that higher education had benefitted from record funding increases and that the reduction, in proportion to the overall budgets, could be absorbed.

Pawlenty adopted a hands-off approach to local government aid (LGA) - a politically supercharged funding area.

He called for tax cuts in his budget proposal.

Sales tax cut

Pawlenty proposes a one-eighth percent statewide sales tax cut to offset the harm, he opined, the Democrats had inflicted on the state with their recent transportation tax increases.

Democrats didn't like the tone of the explanation.

"That's Washington D.C. spin," said House Majority Leader Tony Sertich, DFL-Chisholm.

Democrats, though expressing a willingness to explore the budget proposal, took issue with some opinions the governor expressed. House Majority Leader Tony Sertich, DFL-Chisholm, and Assistant Senate Majority Leader Tarryl Clark, DFL-St. Cloud, greeted the press in the corridor outside the Governor's Office Friday afternoon.

The Minnesota Chamber of Commerce supported the transportation finance bill, he pointed out. But the Chamber supports the governor now on his budget proposal. "We wholeheartedly support the governor's message to address the deficit by holding government accountable and by using available resources," said Minnesota Chamber President David Olson in a statement.

Minnesota Business Partnership Executive Director Charlie Weaver agreed. "We don't need a tax increase to fill the budget gap," Weaver said, a former Pawlenty Administration official. "We need some modest spending restraint and a focus on long-term economic growth," he said in a statement.

Pawlenty's proposed statewide state sales tax cut is estimated to save Minnesotans about $77 million this spending cycle.

Democratic leaders insisted they will study the governor's budget proposal. "With any budget, the devil is in the details.," said Sertich.

House and Senate committees are expected to begin reviewing the governor's budget proposal next week.

Pawlenty argued that even with the budget cuts he is proposing, state government spending over the 2008-09 spending cycle will still increase about 9.2 percent over the previous.

(Photos by T.W. Budig, ECM Capitol Reporter)