Gov. Tim Pawlenty marked the start of the new fiscal year Wednesday by formally approving a plan to erase a $2.7 billion budget deficit.
Pawlenty is using his executive authority to balance the books on his own through spending cuts and accounting shifts. That unilateral approach has angered many Democrats and special interest groups, as well as set the stage for a possible legal challenge.
Speculation about a potential lawsuit began soon after Gov. Pawlenty announced his plan to balance the budget using an emergency authority known as unallotment. When the governor has been asked if he thought a legal fight might be looming, Pawlenty hasn't seemed worried.
"Who can ever predict legal action? Anybody can file a lawsuit," Pawlenty said. "It doesn't mean they're going to win. On that point, we feel very confident about our ability to do this."
Minnesota governors have used unallotment in the past to resolve short-term budget deficits that show up late in the biennium. Pawlenty's plan for unalloting at the start of a budget cycle far exceeds any previous action, and several DFL legislators say they think he's gone too far.
"He is trying to change state law and state statutes in a number of ways that he absolutely does not have the authority to do," said DFL Rep. Ryan Winkler of Golden Valley.
“We're very comfortable that we're well within the purview of the unallotment statute.”Ward Einess, State Revenue Commissioner
Winkler said he has two problems with Pawlenty's unallotment. First, Winkler isn't certain a governor can balance the budget on his own. He said Pawlenty decided to sign all of the spending bills the Legislature sent him but not the tax bill that would have paid for the programs. Winkler argues the deficit was not an unanticipated event, but rather the creation of Pawlenty's own veto pen.
Secondly, Winkler said Pawlenty isn't simply cutting funding for certain programs but is reworking statutes - which is the job of the Legislature. For example, he said the governor is trying to limit the number of hours Personal Care Attendants can work, as well as the size of a renter's tax credit.
"In the first principle, he doesn't have the right to do this but then to go through and change a statute, change a law, that is in effect just because he says he can is beyond his constitutional authority and way beyond his constitutional authority and way beyond any kind of power the governor has," Winkler said.
Many legislators are hoping for a lawsuit. DFL House Speaker Margaret Anderson Kelliher of Minneapolis has met with representatives of some of the organizations or entities that will be harmed by unallotment. Cities, state employee unions, health care organizations and schools have discussed the possibility of a lawsuit, but none has sued yet.
Hennepin County Medical Center is keeping its options open. Hospital official Mike Harristhal said HCMC will lose $80 million in state funding over the next two years as a result of unallotment and other budget cuts. Harristhal said all options, including a lawsuit, are on the table.
"Because [we've] never experienced anything as sizable as what we're going through," Harristhal said. "There have been previous budget cycles where we experienced seven-figure insults to our financial reimbursement but this is so far off the scale that it's really uncharted territory for us."
The government watchdog group Common Cause Minnesota is also looking at its legal options. Executive Director Mike Dean said he's troubled by Gov. Pawlenty's decision to eliminate a tax refund for political contributions. Dean said those refunds are written in statute.
"Because this program, specifically the political contribution refund program, is outlined in state statute, we don't believe the governor can just get rid of it through the unallotment process," Dean said.
Eliminating the Political Contribution Refund will save the state $10.4 million over two years. State Revenue Commissioner Ward Einess said he's confident the governor has the legal authority to ax that program on his own.
"Legal counsel has fully vetted all of the unallotment proposals we've made and we're very comfortable that we're well within the purview of the unallotment statute," Einess said.
That unallotment statute might be coming to an end even without a court fight. DFL leaders say they'll propose significant changes in the law next session to limit a governor's authority to make unilateral budget cuts.
Gov. Pawlenty said he doesn't support changing the law that allows unallotment.
"Unallotment has been in existence since 1939," Pawlenty said. "Legislative leaders throughout all those years and all that history, all those decades, didn't allow the situation to develop like this one has.
"So I think if they would simply step back and look at the very easy practical things they could have done to avoid this situation, it's a non issue."