In a grueling and sometimes-tearful session on Sunday, May 17, the House failed to overturn Governor Tim Pawlenty’s veto of its tax and finance omnibus bill, by an 85-49 party-line vote that saw two DFLers defecting to the Republican side. By an 87-47 vote, the House also failed to overturn the Pawlenty line-item veto that ends medical assistance for 30,000 General Assistance recipients in mid-2010. In the Strib, Lori Sturdevant summarized:
DFLers warned that depriving the poor of routine medical care would only cost society more, as those now covered by the vetoed program seek medical care at costly emergency rooms. But money was not the focus of the House debate; morality was. This somber, emotion-laden debate seemed to be about Minnesota’s soul. DFLers invoked Scripture and, in some instances, shed tears as they pleaded with Pawlenty’s fellow Republicans to put politics aside and vote to preserve health care for “the least of these.” They pointed out that the bulk of the program’s beneficiaries suffer from mental illness, chemical dependency, and chronic disorders including diabetes, arthritis and heart disease.
In addition to the effect on individual recipients, the cuts made by the governor mean immediate downsizing in hospitals and layoffs of more employees.
Pawlenty sent a “proposal” to legislative leaders on Saturday, but it contained nothing new. Steve Perry in PIM outlined his plans for unallotment during the biennium, if the legislature does not give him what he wants today:
• A $1.75 billion education cost shift–or the closest approximation of one that Pawlenty can manage on executive authority alone;
• $450 million in local government aid reductions;
• $250 million in additional, unspecified health and human services cuts, which Pawlenty will let the Legislature select if they in turn agree to release the $45 million or so surplus in the Health Care Access Fund to help mend the general fund.
• And–most surprising–a $190 million cut to higher education that far exceeds the $38 million cut Pawlenty called for in his initital budget and the $60 million reduction the Senate proposed.
Pawlenty wants the legislature to “balance” the budget by agreeing to a combination of education funding “shifts,” borrowing, and deeper cuts.
Education funding shifts Pawlenty wants to “shift” education funding, a budgetary sleight of hand that delays payments of state aid to schools into the next fiscal year. That “balances” the budget on the backs of public schools, which must pay for teachers, books, insurance, fuel, etc. when the bills are due, borrowing money until the state aid is finally delivered. That means education money would go to pay interest on loans rather than paying for education. Parents United for Public Schools explained:
[S]hifts provide one-time money that needs to be paid back so are not a long-term solution. One could argue that it is not even a short-term solution since it is simply using late payments — as one might on a credit card. And like a credit card, interest must be paid if school districts need to borrow in order to make their payroll.
Presently schools are paid 90% of state aid in the current year and 10% in the next year. This is referred to as a 90/10 shift. Shifts that have been spoken about have been 80/20 (80% in the first year and 20% the next) and 73/27. This morning in the Legislative Commission conversation, there was mention of a 64/36 shift. The Speaker asked repeatedly what that would do for schools. Another way to look at this aid payment shift is that we are balancing the state budget by using school dollars. Recent history shows that when this shift is “bought back” (the last one took five years to “buy back”) it will be viewed and publicized as “new money for schools.”
Borrowing Pawlenty wants to borrow against future payments from the tobacco lawsuit settlement. Whether or not that is a violation of the purpose of the settlement, practical problems remain: sale of the future payments will bring in less cash than the payments would, and sale of the bonds might bring in substantially less than Pawlenty’s forecast, because of today’s market.
More cuts After the legislature adjourns, the governor can balance the budget unilaterally through “unallotments.” That means cuts in already-allotted funding, in the sole discretion of the governor. New cuts – whether agreed to by the legislature today or imposed by the governor after the session, come on top of cuts already made. Those include not only the cuts to medical assistance but also cuts in local government aid that have already resulted in hiring freezes, layoffs, library and park closings, cuts in higher education funding, and cuts in state-funded health care eligibility and reimbursement rates for health care providers.
The rejected “fourth tier” tax proposal The DFL tax proposal, passed by the legislature and vetoed by Pawlenty, includes a fourth tier of income taxes, imposing a higher rate on the state’s highest earners. MinnPost reports that the DFL-backed fourth-tier income tax increase would have raised money from people who can afford it.
The DFL leadership is passing out a document showing that the fourth-tier tax hike they proposed – and the governor vetoed – would cost a family of four with an annual income of $300,000 $9 a month.
“A pizza a month,’’ said Kelliher in contempt. “Is it worth a pizza a month to that family to keep their hospitals open, their seniors cared for?’’
MinnPost points out that a family of four with an income over $400,000 would have to pay for “a bunch of pizzas” — with the fourth-tier tax costing them $102 a month.
If you really want to know who can afford to pay more taxes, take a look at the Strib’s annual survey of highest-paid MN execs