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Go to Gov. Pawlenty's 2005 state budget
Gov. Pawlenty's 2005 state budget
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Deconstructing Pawlenty's budget
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Deconstructing Pawlenty's budget plan
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Gov. Pawlenty's budget proposal contains no increase in state taxes, but it does find new revenue in other places. Some say it continues to push the cost of government onto cities, counties and local school boards. (MPR Photo/Mark Zdechlik)
Gov. Tim Pawlenty has released a two-year $30 billion state budget proposal that boosts general spending by almost 6 percent over current levels. The plan reins in escalating health care costs, and also relies on new gambling revenue from a proposed casino partnership with Indian tribes. Pawlenty says the plan wipes out an expected $700 million shortfall while sticking to his pledge not to raise state taxes. But critics say the governor is merely pushing costs down to cities, counties and school boards.

St. Paul, Minn. — During his budget presentation, Gov. Pawlenty stressed that state revenues were increasing -- and so was state spending. K-12 schools are slated to receive 2 percent per year increases in basic funding, while higher education money would go up $200 million. The state budget, he announced, was for the most part in good health.

"The overall state budget isn't growing uncontrollably or irrationally or unsustainably in any category except one," Pawlenty said. "There's one category that is out of whack. And it is this category of welfare health care spending."

Pawlenty says rising caseloads and runaway health care inflation were straining the state's health and human services budget. State officials predict that to maintain the current level of service would require a 20 percent increase in that portion of the budget.

To hold the line at 15 percent, Pawlenty is proposing to restrict access to the state's MinnesotaCare program for low-income workers, dropping as many as 27,000 Minnesotans from the rolls by 2009. Most would be working adults without children, and most would be ineligible for any state assistance unless their medical costs drove them deep into poverty. For single adults, that means earning less than $600 a month.

Sen. Linda Berglin, DFL-Minneapolis, is a staunch supporter of MinnesotaCare. She worries the governor's plan would destroy lives.

"Those are working people. Those are people paying taxes. They need their health care in order to show up for their job, deliver the services that Minnesotans need -- when they go to the video store, when they put their kid on the school bus. They need those people to do those jobs," Berglin said.

They go around the state and say, 'Well, it's not enough for this, enough for that, and Pawlenty won't raise taxes, blah, blah, blah.' Well, where's your plan? If you believe we should increase taxes, come on out with it. Let's have the debate. Come on, let's go.
- Gov. Tim Pawlenty

Pawlenty's plan to cut MinnesotaCare comes even as the health care access fund that pays for it shows a surplus. But Pawlenty wants to divert that money collected from health care providers to general state needs.

The governor's budget was praised by business interests for holding the line on general state taxes. Mike Hickey represents the National Federation of Independent Businesses. He says a quick resort to new tax dollars would darken the state's economic climate.

"It enhances all the image Minnesota's been trying to erase. We have a lot of good things here, but I don't think it's going to help us to be the highest-taxed state in the country," said Hickey.

The budget, however, is not without new revenue. Pawlenty proposes to extend taxes on liquor and rental cars that were otherwise set to expire. He would also collect sales taxes on leased cars upfront, rather than spreading them over the life of the lease.

The single largest revenue enhancement, however, comes from a proposed casino that Pawlenty says the state should operate with a coalition of northern Indian tribes. The White Earth, Red Lake and Leech Lake bands want to expand their gambling revenue by opening a Twin Cities facility.

The plan calls for an upfront payment of $200 million to the state. But tribes with relatively successful casinos oppose the measure, arguing it would siphon revenues away from their existing operations. John McCarthy represents the Minnesota Indian Gaming Association.

"He finally made it official that he's breaking his word to the tribes," said McCarthy. "This governor gave his word and committed to them that under no circumstances would he expand gambling."

In fact, Pawlenty had previously opposed new gambling. But just a year ago, he shifted positions. And more recently, he's argued that the three northern tribes represent 85 percent of all Native Americans in the state, but have failed to benefit from the gambling boom.

The gambling issue cuts across party lines -- but Democrats generally argue that casino payments are unstable and shouldn't be used to finance state government.

DFLers also criticized the governor's plan for increased school funding, noting that a significant portion of it is to be built on voter-approved property tax increases. Sen. Larry Pogemiller, DFL-Minneapolis, chairs the Senate Tax Committee. He says the governor's budget, far from holding the line on taxes, merely shifts them to homeowners.

"There is going to be, again, increases in property taxes on every homeowner in this state at high levels. Now, is that fair?" Pogemiller asked.

Pawlenty, however, attempted to preempt some of the expected sniping. He says if Democrats don't like elements of his plan, they'll need to show a better way of balancing the budget.

"So they go around the state and say, 'Well, it's not enough for this, enough for that, and Pawlenty won't raise taxes, blah, blah, blah.' Well, where's your plan?" the governor asked of the Democrats. "And if you believe we should increase taxes, come on out with it. Let's have the debate. Come on, let's go."

Democrats in both the House and Senate, however, studiously avoided any talk of raising taxes, arguing that they'll present their alternatives after they've had a chance to study Pawlenty's budget in greater detail.

Other groups weren't so shy. From state employee unions to social service advocates to local government officials, a chorus has risen in support of tax increases. St. Cloud Mayor John Ellenbecker says previous cuts in state aid to cities have pushed municipal finances to the edge. He says it's time to rethink the no-new tax pledge, and to increase general state revenue.

"We've had continued increases in demand for services with only the property tax to fall back on. And we just don't think that's appropriate," Ellenbecker said. "We really think that the revenue issue has to be addressed by the governor. And we don't think it's being addressed by this budget."

Ellenbecker says he hopes Democrats, and even Republicans, will force Pawlenty to abandon his anti-tax position. But so far there's little open enthusiasm for proposing new income or sales taxes. DFL House Minority Leader Matt Entenza says the first thing he'll do is take the governor's plan on a Minnesota road show, soliciting citizen advice.

"They can tell us whether or not they think this is the road for Minnesota. But it seems clear to me that when we ask Minnesotans to listen, that what they told us in the November election is that this approach is not balanced and isn't fair," said Entenza.

In the fall House elections, Democrats picked up 13 seats, knocking the GOP majority down to one member. Entenza says that should give the governor and his Republican allies pause before they trim back health care and propose property tax increases to pay for schools.

But Republican House Speaker Steve Sviggum says rather than trade barbs, Democrats should step forward and help enact the governor's plan as a sign of bipartisan unity.

"If, in fact, the words about cooperation -- and if in fact the words about getting along and serving the best interests of Minnesota and getting the job done, if those are more than mere words -- maybe they're just mere words from the Democrats -- but if they're more than mere words, you should expect that there'll be responsibility for some of their votes for these bill on the floor, too," Sviggum said.

Sviggum isn't just expecting DFL votes -- he's counting on them. He acknowledges some members of his own party will jump ship for one reason or another as the governor's spending plans are debated. And he says in order to scrape together majority support for a budget, he'll need at least eight to 10 Democrats.

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