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. PawlentyâÄôs plan included $46 million in higher education cuts âÄî $36 million to the University of Minnesota and $10 million to the MnSCU system âÄî an amount University Chief Financial Officer Richard Pfutzenreuter said is disappointing but expected. âÄúWeâÄôre a people business, and itâÄôs going to fall ultimately on fewer employees,âÄù Pfutzenreuter said. âÄúThereâÄôs just no way to avoid it.âÄù 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. âÄúThe 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,âÄù Pawlenty said in a statement. âÄúWhile this budget maintains funding for priority areas, it contains dramatic spending reductions in many programs.âÄù Rep. Tom Rukavina, DFL-Virginia, Minn., chairs the higher education committee and said he thinks the governor would have âÄúgleefullyâÄù cut deeper into higher education funding if not for the regulation. âÄúHeâÄôs stealing from students, jeopardizing the public higher education system, and itâÄôs because heâÄôs not focusing on whatâÄôs important for Minnesota,âÄù said Rukavina. Higher education makes up about 9 percent of the stateâÄôs budget, with the University set to receive $627 million from the state in 2011. âÄúThe governor did go to the maximum, which is too bad, but we probably will as well because weâÄôve got a big hole to fill,âÄù said Sen. Sandy Pappas, DFL-St. Paul, chairwoman of the Senate Higher Education Committee. Last spring, the UniversityâÄôs 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, PawlentyâÄôs 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. âÄúWeâÄôre going to give the Legislature a full and fair and robust opportunity to help us as partners sort through this and solve this,âÄù Pawlenty said in a press conference. The governorâÄôs proposal isnâÄôt 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 PawlentyâÄôs proposal as well, including his plan to cut taxes for businesses and his planâÄôs inclusion of federal Medicaid funding that hasnâÄôt yet been approved by the federal government. âÄúClearly there is one major gimmick in this proposal, and thatâÄôs about one-third of it is dependent on federal funds that have not passed yet, and we do not know if theyâÄôre going to pass,âÄù 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 MinnesotaâÄôs 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. âÄúIf it is going to stimulate the economy, itâÄôs not going to help within the next two years,âÄù 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 PawlentyâÄôs proposals are in the ballpark. âÄúThe honest, straightforward parts of the budget, I think weâÄôll probably implement most of them,âÄù Pogemiller said.