Pawlenty’s cuts balance budget

Andrew Pritchard

Gov. Tim Pawlenty cut approximately $280 million from state programs and agencies Friday after the House and Senate failed to agree on a plan to contain the state budget deficit in the current fiscal year.

A conference committee worked into the early hours Friday morning but failed to reach a compromise, despite Pawlenty’s 10 a.m. deadline.

In announcing his decisions, the governor took a more conciliatory tone toward legislators than Chief of Staff Charlie Weaver in telling the conference committee to “stop screwing around” late Thursday.

“We are not here to bash or blame the Legislature. We thank them for their efforts,” Pawlenty said. “This is not about blame, it’s about responsibility, and the responsibility now falls to me.”

Under Minnesota law, the Legislature must balance the state’s budget every two years, and the governor has the power to “unallot” money from state programs if the Legislature does not cover a deficit.

According to a Friday memo from Finance Commissioner Dan McElroy to legislative leaders, Pawlenty will first spend $23.9 million of the state’s budget reserve.

The Revenue Department will save $50 million by delaying refund payments for sales taxes on capital equipment. Spending cuts will cover the rest of the $356 million deficit.

Pawlenty’s unallotments included reducing the state ethanol subsidy from $27 million to $6 million, which the governor described as a concession to legislators after he proposed cutting the amount to zero.

Pawlenty also cut the 21st Century Mineral Fund – which provides money for mining technology improvements on Minnesota’s Iron Range – from $59 million to $10 million.

K-12 education grants also lost money, although Pawlenty said he only cut programs that affect education peripherally, such as facilities money and after-school programs.

“In our view, (the cuts) don’t directly impact the regular K-12 day or regular K-12 classroom,” he said.

Despite the cuts, Pawlenty said, the state might still run a budget deficit in the current fiscal year if expenses are more than projected.

“It is possible that we could be back in the soup in ’03,” he said.

Pawlenty said he would prefer a legislative solution to budget problems but would unallot again if the Legislature could not cover future deficits.

Both the governor and lawmakers are now turning to the state’s projected $4.2 billion 2004-05 deficit – which Pawlenty has repeatedly called a “tyranosaurus rex” compared to the 2003 shortfall’s “mosquito.”

In the next round of budget negotiations, the governor cannot unallot. The Legislature must pass a plan, which Pawlenty will either approve or veto.

“They’ve got a little more skin in the game in round two,” he said.

Meanwhile, bond rating service Moody’s placed the state’s general obligation bonds on its “watchlist” on Thursday, signaling it might reduce the state’s rating.

“The watchlist action reflects the dramatic weakening of the state’s financial position that has occurred over the last year,” the company said in a written statement. “The weakened finances are the result of both the budgetary choices made during last year’s legislative session and the state employment picture that has been hit harder than the nation’s.”

The state’s bonds are currently rated AAA – the company’s highest rating – with a negative outlook. Placement on the watchlist indicates Moody’s might reduce the bonds to AA1 status.

Andrew Pritchard covers politics and

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