Pawlenty: Minnesota 'unlikely' to tap credit line

Gov. Tim Pawlenty on Thursday downplayed the likelihood that Minnesota would need to borrow money to pay its bills, even as his administration prepares to do just that.

Pawlenty, a likely Republican presidential candidate, told The Associated Press he doesn't think the state will need to tap a line of credit officials are setting up to deal with a cash crunch. Projections show cash levels dipping below a minimum $400 million cushion as soon as December - and that's after his administration juggles business tax refunds and payments to schools and the University of Minnesota to cover state obligations.

"The cash flow situation, while not insignificant, is simply a temporary cash flow issue," Pawlenty said from the Minneapolis-St. Paul International Airport before departing on a trade mission to China and Japan.

"It's not ideal but it's not that big a deal and it's manageable," he said.

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Management and Budget Commissioner Tom Hanson, Pawlenty's top finance adviser, told senior lawmakers Tuesday that the state may have to borrow from the line of credit in December if current cash-flow projections hold.

To help stave off the cash crisis, the administration is diverting money that normally goes into dedicated accounts, putting off $141 million in payments to 134 school districts, deferring $89 million in aid to the University of Minnesota and delaying $221 million worth of tax refunds to Minnesota businesses until January.

Pawlenty said such financial maneuvers are "quite common" inside government during bad economic times, but he acknowledged that going beyond that to borrow outside money is unusual.

"We just want to have it there in case it's needed," Pawlenty said.

The governor said the state will end a two-year budget cycle next June with hundreds of millions of dollars to spare after he signed off on about $250 million in federal Medicaid assistance earlier this week. He and lawmakers eliminated a deficit earlier this year without that cash.

Minnesota has maintained strong credit ratings. The state budget is technically balanced through June, but cash levels are uneven because spending and revenues don't match up each day. A new budget forecast is due in late November. The last forecast anticipated a shortfall approaching $6 billion over two years starting in July 2011.

Pawlenty leaves office in January.

(Copyright 2010 by The Associated Press. All Rights Reserved.)