With the state facing a projected $1.2 billion budget deficit, Gov. Tim Pawlenty let the budget ax fall Monday when he released his plans for cuts to state spending.
The steepest cuts were taken from local government state aid and health and human services programs, which made up the $1.2 billion needed to balance the budget.
Pawlenty’s plan included $46 million in higher education cuts – $36 million to the University of Minnesota and $10 million to the MnSCU system – an amount University Chief Financial Officer Richard Pfutzenreuter said is disappointing but expected.
“We’re a people business, and it’s going to fall ultimately on fewer employees,” Pfutzenreuter said. “There’s just no way to avoid it.”
The University has already begun planning for the cuts. About two-thirds of the cuts will be made by eliminating staff and the other third from delaying new investments, Pfutzenreuter said.
Pfutzenreuter said he is thankful that federal law prevented the governor from cutting deeper into higher education.
Federal regulation requires states to fund their higher education institutions at their 2006 levels at minimum or the states risk being ineligible to get higher education stimulus dollars.
“The historic drop in the economy has caused an historic drop in state revenues. Government has to live within its means by setting priorities and tightening its belt just like everyone else,” Pawlenty said in a statement. “While this budget maintains funding for priority areas, it contains dramatic spending reductions in many programs.”
Rep. Tom Rukavina, DFL-Virginia, Minn., chairs the higher education committee and said he thinks the governor would have “gleefully” cut deeper into higher education funding if not for the regulation.
“He’s stealing from students, jeopardizing the public higher education system, and it’s because he’s not focusing on what’s important for Minnesota,” said Rukavina.
Higher education makes up about 9 percent of the state’s budget, with the University set to receive $627 million from the state in 2011.
“The governor did go to the maximum, which is too bad, but we probably will as well because we’ve got a big hole to fill,” said Sen. Sandy Pappas, DFL-St. Paul, chairwoman of the Senate Higher Education Committee.
Last spring, the University’s two-year budget from the Legislature was cut by $105 million. In June, Pawlenty cut University spending by $50 million in unallotments in efforts to balance the state budget.
Aside from cuts to higher education, Pawlenty’s budget also cut $250 million from local government aid programs, $347 million from health and human services programs and $181 million from state agencies and other programs. The plan also included a $387 million increase in federal Medicaid funding.
“We’re going to give the Legislature a full and fair and robust opportunity to help us as partners sort through this and solve this,” Pawlenty said in a press conference.
The governor’s proposal isn’t the final say on fixing the budget, as lawmakers will begin meeting as early as this week to discuss their own proposals. DFLers have already spoken out against other parts of Pawlenty’s proposal as well, including his plan to cut taxes for businesses and his plan’s inclusion of federal Medicaid funding that hasn’t yet been approved by the federal government.
“Clearly there is one major gimmick in this proposal, and that’s about one-third of it is dependent on federal funds that have not passed yet, and we do not know if they’re going to pass,” Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, said in a press conference.
In his State of the State address last week, Pawlenty introduced a jobs creation bill aimed to improve Minnesota’s business tax climate. The bill includes corporate tax cuts, tax credits for new businesses and investment incentives, all of which Pawlenty said will help spur job growth.
“If it is going to stimulate the economy, it’s not going to help within the next two years,” Pogemiller said of the bill.
Apart from disagreement over the business tax cuts and $250 million in proposed cuts to local government aid, Pogemiller said the overall numbers in Pawlenty’s proposals are in the ballpark.
“The honest, straightforward parts of the budget, I think we’ll probably implement most of them,” Pogemiller said.