Gov. Pawlenty has ordered state agencies to do an inventory of payments to see if they can cut back in case the state runs out of cash. Pawlenty made the announcement after he met with his cabinet to discuss the state's financial picture.
The action comes as the governor and state lawmakers are battling over the best way to balance the state's budget in light of this week's Supreme Court ruling that could add billions of dollars to the state budget deficit.
One day after his spokesman suggested a partial government shutdown may be needed to manage the state's cash flow crunch, Pawlenty dialed back the rhetoric.
He now says he's only asking agency and department heads to identify areas where the state could delay or defer payments, and suggested certain items like health care grants could be held back for quite some time.
"If there are some programs that aren't required to get their money by summer, if they can get it in the fall or next winter, we'll delay as many of those payments as possible," said Pawlenty. "There may be some other payment obligations that can be shut off or diminished -- but that's what this process is about."
The Pawlenty administration has characterized the state's fiscal picture as an "imminent and severe cash flow crisis." Those comments were made after the state Supreme Court ruled that Pawlenty didn't have the authority to make cuts in June 2009 to erase a $2.7 billion budget deficit in the current two-year budget cycle, which ends June 30, 2011.
The ruling was narrowly scoped to a special diet program. But the concern is that school districts, cities and other groups could petition the court for the restoration of their cuts.
It hasn't happened yet, but Pawlenty says it will be a problem if it does. He again criticized the court for its decision, and urged the Legislature to ratify his unallotment cuts to solve the problem.
"Because of the court's order, we don't have the money to meet all of the obligations. So the Legislature has to come up with a plan that I can sign that will reduce spending, so that the budget is back in balance," said Pawlenty.
The House did as Pawlenty asked, and brought his original unallotment plan to the floor for a vote during Friday's session.
"If there is the support to do this, we'll get closer to balancing the state budget moving forward," said DFL House Majority Leader Tony Sertich. "If there's not support in the Legislature to move forward with this proposal, we'll have to find a new proposal."
The House overwhelmingly defeated the measure 105-27. DFL House Speaker Margaret Anderson Kelliher said House Democrats will propose a budget plan that includes a school payment shift, budget cuts and unspecified revenue or tax increases. She said specifics will be released as early as Monday.
Pawlenty and Republicans in the Legislature say they remain opposed to a tax increase. Republican Senate Minority Leader Dave Senjem predicts a budget standstill if Democrats insist on raising taxes.
"If that is the approach, and they continue to cling to that approach, I think we're going to be here beyond May 17th -- or at least we're going to be coming back," said Senjem, referring to the day the Legislature is required to end its session.
Democrats also question whether Pawlenty has the ability to withhold or delay payments -- especially because he signed the spending bills into law last year. Pawlenty vetoed the DFL-backed tax bill that would have paid for the added spending.
DFL Senate Majority Leader Larry Pogemiller said the state's cash flow problems have less to do with the court ruling and more to do with Pawlenty's financial management.
"I do not believe a successful strategy is to try to leverage everybody with some doomsday scenario. I don't think gets you where you need to go," said Pogemiller. "I think we need a balanced bipartisan legislative/gubernatorial solution to get us through to next year, when I think there will be a new governor who will be willing to make the tough decisions."
Pawlenty and lawmakers have less than two weeks to reach a budget deal before the constitutional deadline for the Legislature to adjourn. Pawlenty said it's possible that he'll call lawmakers back for a special session if they can't reach a deal.