msu budget2

Gov. Tim Pawlenty’s budget proposal would force Minnesota State University to make $8.2 million in cuts.

Even after relying on state aid from a speculative one-time federal stimulus bill, nearly $1 billion in borrowing and similar-sized accounting shifts, Gov. Tim Pawlenty needed to make steep cuts in aid to local governments, health care, colleges and state agencies.

That’s the reality of writing a budget plan that eliminates a $4.8 billion state budget shortfall — even more so when the Republican governor is excluding tax increases while pushing for business tax cuts.

“This budget involved some tough decisions — we realize that,” Pawlenty said Tuesday.

Area Democrats, part of a large DFL legislative majority, tempered their criticism, saying they needed time to study the massive document and get input from Minnesotans. Lawmakers will be sponsoring meetings statewide next month to seek reaction to Pawlenty’s plan from average citizens and interest groups impacted by the cuts.

“What you don’t see on a paper budget are the real people affected by the cuts,” said Rep. Terry Morrow, DFL-St. Peter. “... The question is: Who’s impacted, how much, and is there a better way to cut the budget than the governor’s proposing?”

Republican Sen. Dick Day of Owatonna can guess what the people attending will say.

“We all know what the input is going to be,” Day said. “I don’t think anybody’s going to show up at the meeting and say ‘This is good. Cut some over here, too.’”

Following those meetings comes a March 3 update of the November budget forecast — one that many lawmakers worry will show a $7 billion shortfall because the national economy has deteriorated significantly over the winter. The new forecast will be the foundation for budgets written by the Legislature for the two-year budget cycle starting July 1, and those budgets will need to be reconciled with Pawlenty’s priorities sometime before the current budget expires on June 30.

“I’ve been saying $7 billion since the end of November,” said Rep. Kathy Brynaert, DFL-Mankato. “It’s not that I have any great forecasting power, because I don’t, but it’s just a little bit of common sense.”

The size of the problem means cuts that will reverberate across Minnesota. On that, Republicans and Democrats agree.

“This is going to be really, really bad for just about everybody,” Day said.

“There’s no question that cuts are going to be needed,” said Brynaert, adding that nothing — including K-12 school funding — can be excluded from consideration.

Tax increases shouldn’t be ruled out either, as part of a multi-pronged approach recommended by most experts, Brynaert said.

“I have yet to hear any economist talk of resolving a deficit of this size without increasing any revenues,” she said.

Pawlenty, as he has in dealing with previous shortfalls, pledged to block any tax increases. Instead, he proposes about $2.5 billion in spending reductions, counts on $920 million from a yet-to-be-approved federal economic stimulus bill and uses a $1.3 billion accounting shift that pushes payments to schools into the following fiscal year.

He also proposes borrowing nearly $1 billion through a bond sale that would be repaid over 20 years, using payments from a successful lawsuit by the state in the 1990s against tobacco companies.

The budget goes well beyond eliminating the $4.8 billion shortfall, leaving money for $287 million in tax cuts for businesses, $323 million in new spending (mostly for schools) and $250 million for the state’s depleted reserve funds.

“I don’t think I see anything really scary,” said Rep. Tony Cornish, R-Vernon Center, noting the small increase for K-12 education, protections for nursing homes and the potential for counties to escape with less severe cuts than expected.

Still, Cornish expects many organizations will be upset with looming spending cuts, including cities facing steep cuts in state aid, recipients of subsidized medical insurance, care providers for the disabled and many others.

“I have a feeling I’m going to be hearing from a lot of folks,” Cornish said.

Lawmakers will be listening, particularly interested in the repercussions of the cuts, said Sen. Kathy Sheran, DFL-Mankato. For instance, pushing 84,000 working poor off of the Minnesota Care medical insurance program will shift costs to hospitals and clinics when those people get sick.

“We really need time to digest it,” Sheran said. “We need to go out and let people know the implications of this in our community.”

At first glance, though, the plan seems familiar with its use of accounting shifts and tobacco revenue, Sheran said.

“It pushes the repeat button in terms of how we’re dealing with the deficit,” Sheran said.

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