Minnesota legislators are trying to get an early start on the state's projected $1.2 billion budget deficit before the 2010 session starts on Feb. 4, and some are wondering just how much state spending is left to cut.
A judge's ruling last week took issue with the way Gov. Tim Pawlenty solved a record deficit last spring. The Republican governor made unilateral spending cuts and payment shifts when he couldn't reach an agreement with DFL legislative leaders. Pawlenty is appealing, but in the meantime, he said he wants to work with legislators to revisit last year's budget.
They also have to solve a new $1.2 billion deficit caused by the slow economy and lower-than-expected tax collections. Pawlenty's chief financial advisor, Management and Budget Commissioner Tom Hanson, said the challenge is significant.
"It is always difficult when you [are] six months into a biennium and you're already down $1.2 billion," Hanson said. "Now the good thing is you have about 18 months of the biennium left, so you have more money that's unspent."
Hanson said some potential cuts will be limited by the strings attached to federal economic stimulus funds. The state could lose some of that $2 billion in one-time money if it doesn't maintain funding levels for K-12 and higher education above 2006 levels. Eligibility levels for health care programs must also be maintained.
Still, Hanson said those restrictions are manageable. He said the governor will make specific recommendations for cuts, as part of a supplemental budget, sometime after the start the 2010 session.
"We haven't decided on a date yet at all," he said.
The governor wants to solve the deficit by cuts alone, and no tax increases. But DFL Rep. Lyndon Carlson of Crystal, chair of the House finance committee, said he wants new revenue included in the discussion. As far as cuts, Carlson said individual committees should set priorities, rather than taking an across-the-board approach. He's also reluctant to protect specific budget areas.
“It is always difficult when you [are] six months into a biennium and you're already down $1.2 billion.”Tom Hanson, Management and Budget commissioner
"The governor has already taken on the cuts side at least one initiative off that table, and that was veterans," Carlson said. "But I think the public has to understand that when you begin to take certain parts of the budget off the table that has a disproportionate cut on other parts of the state budget. So I think you have to be very careful when you do that."
Committee leaders are worried about another year of cuts. DFL Sen. Sandy Pappas of St. Paul, chair of the Senate higher education committee, said she's expecting her budget area to take a hit, even though higher education accounts for less than 10 percent of state spending. Pappas said the federal stimulus requires state spending for colleges and universities to stay above 2006 levels, but she said Minnesota doesn't have a lot of cushion left.
"This is the worst I've seen in the 25 years I've been in public office," Pappas said. "This is the worst budget, this is the worse situation we've been in, where we don't have any kind of pockets of money anywhere. We've used them all up."
Republicans sound more optimistic about finding places to cut. They say state government must simply live within its means, just like Minnesota families. House Minority Leader Kurt Zellers of Maple Grove said he favors across-the-board cuts, and he wants to give government employees a chance to recommend the reductions in their own departments.
"They maybe have a better idea, you shouldn't take it out of our manpower or workforce, but we've got some equipment or we've got a building that we've been leasing for too long, where maybe we won't renew the lease for six months or a year," Zellers said. "Something like that, allowing them to be part of the process, sets it up to be more of a 'we' than an 'us versus them.'"
Finance officials blame the deficit on Minnesota's loss of jobs. That's why, in addition to budget cuts, legislators from both parties are already pushing hard for initiatives next session that create new jobs. Republicans want lower taxes and fewer regulatory burdens for businesses, while Democrats are focusing on a large bonding bill full of public works construction projects.