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Governor prepares for rise in deficit

ST. PAUL -- Less than two weeks into Minnesota's legislative session, warning signs indicate the state's budget deficit may more than double. Gov. Tim Pawlenty wants department commissioners to find ways to trim budgets by 5 percent in case the s...

ST. PAUL -- Less than two weeks into Minnesota's legislative session, warning signs indicate the state's budget deficit may more than double.

Gov. Tim Pawlenty wants department commissioners to find ways to trim budgets by 5 percent in case the state budget deficit grows from $185 million to $500 million, as some hint.

The governor asked for the budget-cutting exercise about two weeks before the state's economic forecast is due.

"It is not a firm directive ... but a suggestion," Pawlenty spokeswoman Leslie Kupchella said. "We have given them a heads-up."

In December, a budget forecast predicted a $185 million deficit.

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Agriculture Commissioner Gene Hugoson told an audience earlier this week that preliminary data indicates a deficit close to $500 million.

However, there are lawmakers, including Rep. Jim Knoblach, R-St. Cloud, who doubt the deficit will be that large.

Knoblach, chairman for the House Ways and Means Committee, said he sees a 50-50 chance the deficit will remain around $185 million. A Wednesday meeting of the Minnesota Council of Economic Advisors produced encouraging figures, he said.

A deficit in the $185 million range can be handled easily, Knoblach said. But one closer to $500 million would be painful, he added.

Last year, legislators and Pawlenty plugged nearly $4.6 billion in the deficit. Lawmakers reached an agreement calling for $28 billion to be spent over two years, a 9.4 percent increase over the previous budget.

Although the overall budget increased, many programs were cut because some costs -- like health care -- rose faster than revenue. Pawlenty and other Republicans rejected a $1 billion Democratic-Farmer-Labor Party plan to raise taxes.

About $500 million is available in the budget reserve and similar funds.

Knoblach said he hesitates taking too much money out of the state's reserves, but some other funds have small excess amounts available. Also, the House last year voted to add a casino to the Canterbury Park horse-race track, which supporters say would pay the state $100 million or more a year if the Senate passes it.

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No decision has been made as to what might be spared cuts, Kupchella said.

However, the governor's office promised to protect state-paid ethanol subsidies, Hugoson said.

Ethanol payments to farmers were cut to 13 cents a gallon last year from 20 cents in one of the legislative session's most heated debates. Ethanol is a corn-based gasoline additive.

Former Gov. Jesse Ventura ordered his commissioners to look at 5 percent and 10 percent cuts when the economy soured late in his term.

Rep. Morrie Lanning,

R-Moorhead, said Pawlenty's budget-cutting request to commissioners is a good planning tool.

"I don't expect we are going to have to do more cutting," Lanning said.

While Lanning said he sees no reason to re-open the budget passed last year, Rep. Paul Marquart, DFL-Dilworth, said a $500 million deficit would do just that.

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"We're going to be back in the budget debate and scrutinizing every program," Marquart said. "Everything is fair game, and rural Minnesota would be on the losing end."

If the deficit grows, Lanning said he hopes Pawlenty protects funding for many human services programs, local government aid, higher education and public education.

"The budget has been through a fine-tooth comb," he said.

Readers can reach Forum reporter Don Davis at (651) 290-0707

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