Back in January, the state was facing a projected $4.8 billion deficit, and Gov. Pawlenty unveiled a budget that reduced state spending by 2 percent.
Minnesota's expected windfall from the federal stimulus softened the deficit slightly to $4.6 billion. But Pawlenty now wants to cut spending by 4 percent. One place he's not cutting is K-12 education.
"We're proposing to use $424 million of the federal stimulus money allocated for education purposes, and dedicate that to K-12 education," said Pawlenty. "That's going to allow us to not only maintain the level of K-12 education funding we proposed in January, but increase it somewhat by $30 million. That's good news."
Pawlenty's budget revisions also put short-term offenders in state prisons, exempt unemployment insurance benefits from state taxes up to $2,400 per individual, and puts another $10 million into the state court system. Cities and counties will still see a reduction in state aid.
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"One-time money ends. When it ends, and the music stops, there are whole bunch of people left with no chair to sit on."
The requirements of the federal stimulus money forced Pawlenty to restore some of the spending cuts he had earlier proposed to higher education.
He also had to delay eligibility changes he proposed that would have cut at least 84,000 people from government-subsidized health care.
"We cannot go forward under that law yet, with our proposals for eligibility changes in [medical assistance] and parents within MinnesotaCare. So we're proposing to delay those until 2011," Pawlenty said.
In the meantime, the governor wants to retool the General Assistance Medical Care program to save an estimated $172 million. Participants would be treated in community clinics instead of hospital emergency rooms.
Democrats say the cumulative cuts to health care, when they take effect on January 1, 2011, are simply too deep. DFL Senate Majority Leader Larry Pogemiller says the governor's budget plays a cruel hoax on Minnesotans.
"That's politics. I'm going to increase funding for K-12, but I'm going to just crush the health care system for severely handicapped individuals and accessibility for 100,000 Minnesotans? That is not a wise decision for the future of our state," said Pogemiller.
Pogemiller and Senate Democrats unveiled a budget plan last week that calls for $2 billion in new revenue and cuts spending by 7 percent across the board, including education. House DFL leaders will unveil their budget plan later this week.
House Speaker Margaret Anderson Kelliher says she's concerned the governor's budget relies too much on accounting shifts and one-time money, and doesn't add up over the long term.
"One-time money ends. That's the very definition of one time," said Kelliher. "When it ends, and the music stops, there are whole bunch of people left with no chair to sit on here."
Republicans offered a generally positive review of the governor's budget revisions. House Minority Leader Marty Seifert praised Pawlenty for restoring $300 million to higher education, and making additional cuts to health and human services programs.
Seifert says the governor has set up an interesting debate with Democrats in the House and Senate.
"I think it's an argument of the Democrats are cutting K-12 to protect the welfare state. The governor is protecting taxpayers and K-12 and is focusing on priorities," said Seifert.
Despite the growing partisan divide, Gov. Pawlenty described the looming budge impasse as "not insurmountable." He said there is enough money lying around to make it work, if Democrats want to make it work.
Here are details of some of the governor's proposals:
Increase funding by using $424 million of federal stimulus funds in the next two years. This will increase Pawlenty's K-12 funding recommendation to $14.1 billion.
Previously proposed reductions in funding for the University of Minnesota and the Minnesota State Colleges and University system would be restored. Pawlenty also renewed his recommendation that both systems freeze or cap tuition increases.
In addition, qualified students should receive increases in student grant funding due to an increase in the Pell grant program under the federal stimulus package.
Certain eligibility-related funding reductions would be delayed until January 2011 in light of the requirements of the federal stimulus package. That move will temporarily restore eligibility for Medical Assistance as well as MinnesotaCare eligibility for parents.
Health Care Reform
Pawlenty proposes saving $172 million from the state's general fund by reconfiguring the General Assistance Medical Care program so care is provided in clinics, where appropriate, not in emergency rooms.
Current inpatient coverage would also be replaced with a more straightforward subsidy to hospitals through an uncompensated care pool. This pool would be augmented with a more limited set of outpatient benefits, including physician, pharmacy, laboratory and mental health services.
Pawlenty recommends repealing the requirement that short-term offenders serve their sentences in county jails. Instead, such offenders will serve their time at state corrections facilities. Many county officials have complained that this requirement was creating a financial burden for them. It will cost the state $8.2 million in FY10-11.
Pawlenty recommends an additional $10 million for the operation of the state courts system. This is one time funding for FY10-11. Court leaders had warned that under the January budget they expected to lose about 15 percent of their work force and would have had to stop hearing some lesser cases.
Exempting Unemployment Insurance Benefits from State Income Taxes
Pawlenty recommends exempting up to the first $2,400 in unemployment insurance benefits to individuals from state income taxes in tax year 2009. This is a one-time $28 million expense to conform to federal law.