Governor proposes 2.2 percent budget cut

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Gov. Tim Pawlenty unveiled his plan to fix the state’s projected $4.8 billion biennial budget deficit using budget cuts, accounting shifts, federal stimulus dollars and nearly $1 billion in “tobacco appropriation bonds.”

In sum, the governor’s budget proposals would shrink the state government by 2.2 percent, or $750 million, over current spending levels. Among the areas hardest-hit by his proposed spending reductions would be health and human services, local government aid and higher education.

“This budget involves some tough decisions — we realize that,” Pawlenty said. (Watch the announcement.)

Although no children would lose health coverage under the proposals, Human Services Commissioner Cal Ludeman said nearly 84,000 adults would likely lose their eligibility for state health care programs over the next two years.

K-12 education would actually see a funding increase under the governor’s proposals, with a focus on Q-Comp and other pay-for-performance initiatives; however, accounting shifts in the area of aid payments to schools are called for to temporarily save the state nearly $1.3 billion.

The governor’s plan assumes a $920 million “placeholder” for funds from a forthcoming federal stimulus package expected to be passed by Congress and signed by President Barack Obama in the coming months. Pawlenty said that while the final dollar amount might be significantly higher, not all of it will likely be “flexible cash” that can be used to shore up the General Fund.

The final piece of the governor’s proposal would be $983 million in one-time funds gained through the sale of “tobacco appropriation bonds” that would essentially bond for half of 20 years’ worth of future revenues from the state’s decade-old tobacco settlement.

Legislative leaders reacted cautiously to the governor’s proposals, noting that the February budget forecast and the passage of the federal stimulus bill would likely change the state’s economic outlook. (Watch the press conferences.)

House Speaker Margaret Anderson Kelliher (DFL-Mpls) said members of her caucus plan to travel around the state getting input on the governor’s proposals from ordinary Minnesotans. She expressed skepticism that a corporate tax cut included in the governor’s plan would help Minnesota’s ailing economy, noting that 46 percent of companies that pay the tax aren’t headquartered in the state.

House Majority Leader Tony Sertich (DFL-Chisholm) said the governor’s current budget proposals would be “the blueprint” on which future budget negotiations would be based.

House Minority Leader Marty Seifert (R-Marshall) praised the governor’s proposals and challenged the DFL to come up with their own solutions if they disagree with the governor. He said he expected DFL leaders would ultimately introduce legislation to raise taxes.

“I need to see the details … but for the most part, I’m largely supportive of this,” Seifert said.

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