Gov. Tim Pawlenty is proposing deep cuts in health care, welfare and state aid to cities and counties as part of his plan to solve a $1.2 billion budget deficit.
But the Republican governor's plan also relies heavily on an expected, but not certain, influx of new federal Medicaid money. DFL legislative leaders quickly blasted the plan and claimed it doesn't really balance the budget.
In outlining his budget adjustment plan Monday, Pawlenty pointed out that Minnesota's financial problems are not unique. The economy is still struggling and unemployment numbers are still high.
The result is less than expected tax revenue and a $1.2 billion hole in the current two-year budget. Pawlenty said difficult spending cuts are needed to match that lower revenue.
"We have to make our budget balance. We have a historic drop in revenues," said Pawlenty. "You have one of the most highly taxed states in the country. Adding more tax burdens 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's supplemental budget protects K-12 education, veterans programs and public safety.
He cuts state aid to cities and counties by $250 million, which comes on top of a similar cut last year.
The reductions in health and human services programs total $347 million, with much of the savings coming from new eligibility limits for health care coverage under the MinnesotaCare program. In total, about 40,000 people would lose some of their current health or welfare state benefits.
Pawlenty is also counting on Congress to provide part of the budget solution. He said he's expecting Minnesota to get $387 million in additional federal Medicaid money.
"[The bill] has passed the House. It's in the president's budget. The leadership of the Senate has embraced it. So, it appears like it's going to happen, but you never know," Pawlenty said.
Other proposed cuts include $181 million from state agency budgets and $47 million from higher education.
Pawlenty also wants to shape state policy with some new spending in his final year as governor. His budget includes $20 million in the current biennium to launch a package of tax breaks for businesses.
"This is a spit in the ocean compared to what should be done," he said. "Minnesota is so out of step in terms of its tax structure from a competitiveness standpoint, that putting these small changes in the tax code is the least of our worries. We should be tripling or quadrupling the effects of this, in my view."
DFL leaders in the House and Senate were still digesting the governor's proposal, but it didn't appear to be going down well.
DFL Senate Majority Leader Larry Pogemiller claimed Pawlenty use of one-time money and other gimmicks represented a failure of his mission to propose a balanced budget. Pogemiller suggested a do-over might be needed.
He also raised concerns about the level of cuts to state aid for cities and counties, and what that means to local police and fire protection.
"He clearly does not hold public safety harmless. In his state agencies he's making cuts, and clearly the reduction of $250 million to cities and counties will effect public safety. I mean there's just no doubt that it will effect that," Pogemiller said.
House Speaker Margaret Anderson Kelliher offered a similar critique. Kelliher, who is a DFL candidate for governor, said Pawlenty shouldn't be counting so heavily on uncertain federal money, or creating future obligations for his corporate tax breaks. She's also troubled by the governor's budget priorities.
"A big piece of his budget proposal here is cutting people, poor people in Minnesota, off of basic health care, grandmas and grandpas off of basic health care, and instead giving that to out-of-state corporations. And I don't think that's in line with Minnesota values," Kelliher said.
Still, Kelliher and Pogemiller both say there are plenty of budget areas where they can agree with the governor. And they plan to take votes on some of the less painful spending cuts in the next few weeks.
Lawmakers will get a clearer picture of the deficit in early March when state finance officials release a new economic forecast.