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Work begins on divvying up the pain
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Rep. Loren Solberg, DFL-Bovey, right, gives a toy dinosaur to retiring Rep. Dave Bishop, R-Rochester, shortly before a legislative hearing began to look at the state's budget woes on Thursday. (MPR Photo/Laura McCallum)
Nearly every group that depends on state funding is nervous, in light of the $4.5 billion projected budget deficit announced Wednesday. And some groups say they have reason to be worried. Nursing homes, cities and counties say if their funding is cut, Minnesotans will feel the impact.

St. Paul, Minn. — Republican Gov.-elect Tim Pawlenty says he won't raise taxes to address a projected deficit that's about 14-percent of the state budget. He says he'll ask everyone to help solve the problem.

"That's going to include townships, that's going to include cities, it's going to include counties and non-profits and private sector businesses and individual Minnesotans," he said.

Local governments were worried even before Pawlenty singled them out. Aid to local governments makes up about 10 percent of the $30 billion state budget, and Pawlenty had hinted he would likely ask cities and counties to share the state's pain.

Gary Carlson, a lobbyist for the League of Minnesota Cities, says cuts to cities will be painful. He says he was just talking to officials in the southwestern Minnesota community of Ivanhoe. The town of 650 residents gets about two-thirds of its budget from the state.

"The clerk there said that given their aging population -- approximately half or two-thirds of their population is senior citizens on fixed income -- they have really no opportunity to really raise taxes substantially, so they would have to make probably deep cuts in services," Carlson said.

Carlson says cities may have to cut fire and police protection, park funding, snow plowing and other services. St. Paul's financial services director, Matt Smith, who was Gov. Ventura's revenue commissioner, says city officials are already talking about hiring restrictions and scenarios of 10-percent cuts in city departments.

"Given that in the general fund, you're talking about police and fire and parks and libraries, they're all really, really ugly. It's hard for a cut in police not to translate into officers. The library budget basically becomes a question either of reducing the hours at all of the libraries or closing a couple of locations entirely," Smith said.

Or cities and counties can raise local taxes. Jim Mulder, executive director of the Association of Minnesota Counties, says he thinks cuts in county aid will mean property tax increases. He says counties don't have much choice, because most of the services they provide are mandated by the state or the federal government.

"The primary area that we would be having to cut is in roads and bridges, and then there are a number of other smaller areas, although even sheriff deputies and those kind of things certainly would be part of the budget discussion," according to Mulder.

While cities and counties can increase their levies, nursing homes don't have that option. Rick Carter, president of Care Providers of Minnesota, says the Legislature limits how much nursing homes can raise their rates. Carter says if the state cuts their funding, nursing homes are in a tough spot.

"We in long-term care cannot add another person to a bed, we can't decide that, for example, we're not going to provide health care every Tuesday afternoon, or we're going to cut back and only serve two meals, not three meals. We just simply don't have those choices," said Carter.

Carter says if nursing home funding is cut, nursing homes will ask the Legislature to allow them to raise their rates. Otherwise, he says some homes will probably be forced to close, at a time when most are full. Cuts in other health-care programs could mean lowering payments to providers or limiting the number of people eligible for programs.

Sen. Linda Berglin, DFL-Minneapolis, who chairs the Health and Human Services Budget Division, says that may not save money in the long run.

"One of the things that generally tends to happen when you don't provide health care for people that are low-income is you see it show up either in property taxes as public hospitals have to pick up the burden or you see it as uncompensated care in doctors offices and hospitals and then that gets translated into higher health insurance premiums," according to Berglin.

Rising costs in state health and human services programs are among the factors contributing to the state deficit. The biggest single area of the state budget is the 40 percent going to K-12 education. Gov.-elect Pawlenty says he'll try to protect funding for the classroom, although he didn't make any promises. He'll submit his budget to the Legislature in mid-February.

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