Facing “gloomier” economic prospects over the next three years, Gov. Tim Pawlenty’s budget chief has directed every state agency to plan for a broad 5 percent spending cut in the next fiscal biennium. (See attached PDF for text of memo.)
This would produce reductions in state payrolls and other expenditures of at least $1.8 billion, according to the Minnesota Budget Project. That would come on the heels of a 7.8 percent cut in real per capita state general fund spending since 2003 under Pawlenty, which left the current two-year state budget $2.6 billion short of the one enacted before he took office.
This persistent disinvestment in Minnesota’s public sector has coincided with the state’s sagging performance compared with other states in personal income, employment and school quality. But the Pawlenty administration has continued to place cutting government among its highest priorities.
“Growth in the overall size and cost of government must be reduced,” said an Aug. 19 memo to state agency heads from Jim Schowalter, Pawlenty’s state budget director.
“What growth?” anyone who looks at the real numbers, adjusted for inflation and population increases, should ask.
Schowalter’s latest directive to state agency commissioners was dated Oct. 14 in the midst of a continuing world financial crisis. It calls for “preliminary” budget options due Monday at the governor’s office to “result in a 5 percent reduction in your total general fund base as well as your direct appropriated other funds base for Fiscal Years 2010-11 (excluding federal funds and internal service funds). Unless otherwise directed by Finance Commissioner Tom Hanson, any proposed increases should be factored in so that the net impact results in the overall reduction target.”
The earlier Schowalter memo ordered agencies to “absorb any increases in the cost of goods and services within their base budget plan.” Among the projected increases to be considered, he added, are 3 percent annual raises in total compensation for state employees, or 6.1 percent over the next biennium.
Agency budget wizards will have to wield very sharp pencils to achieve cuts of this magnitude on top of those of the past five-plus years.
A balanced alternative involving some revenue increases via fees or taxes is hardly under discussion in the current Minnesota House election campaign. Leaders of both parties are emphasizing their resistance to tax hikes, which remains plausible while the projected state budget deficit for 2010-11 still stands at a relatively manageable $940 million.
But the state will release a new budget forecast on Dec. 4 that some say could multiply that number several times over, even without accounting for inflation.
“There’s so much uncertainty in the economy right now that it’s almost impossible to give any guidance on how much revenue will be lost,” State Economist Tom Stinson told the St. Paul Pioneer Press. “But the forecast will be gloomier for revenue in 2009, 2010 and 2011.”
Department-level spending plans will form a basis for Pawlenty’s budget recommendations to the Legislature, tentatively scheduled for Jan. 27. A second official spending and revenue forecast will be issued near the end of February, setting the stage for State Capitol deliberations that are supposed to produce a balanced budget by a May 18 constitutional deadline. The new biennium begins July 1.
Once Tuesday’s election is behind us, it behooves all our state leaders to face the reality of the latest budget crisis of the Pawlenty years — and find a balanced solution that relies on more than further crippling of Minnesota’s public sector.