Budget fixed for now, but deficit will only get worse

The Minnesota Legislature finished a one-day special session this morning and adjourned for the year after passing legislation to close a nearly $3 billion budget gap.

The action came after lawmakers and Gov. Tim Pawlenty reached a deal on the budget late last night but didn't have time to pass it during the regular session.

The governor hailed it as balancing the budget without raising taxes. But lawmakers from both parties say they're concerned it doesn't do enough to address the state's long-term budget problems.

The Minnesota House and Senate made quick work of the budget bill Monday morning, after spending the past two weeks wrangling over the best way to erase the state's deficit.

Gov. Pawlenty was forced to call lawmakers back for a brief special session, because the budget deal was announced just minutes before the Sunday midnight deadline for passing legislation.

The proposal relies on one-year cuts of $830 million in state spending, including aid to local governments, higher education and health and human services. But the biggest piece of the fix is a $1.9 billion payment delay to schools.

Pawlenty praised the budget deal Monday afternoon, and defended his efforts over the past eight years to restrain government spending.

"The principles that I have laid down I believe are absolutely right for the future direction of this state," he said.

Last week, Pawlenty vetoed a bill that would have increased income taxes on Minnesota's top earners. He also rejected proposed surcharges on hospitals and HMOs to pay for a health care plan.

Pawlenty and his Republican colleagues in the Legislature also turned back DFL attempts to shift low-income Minnesotans from two state health programs into Medicaid, as part of the new federal health care law.

The best Democrats could get on that plan was to leave the Medicaid decision to the next governor. Pawlenty said he doesn't support the expansion.

DFL House Majority Leader Tony Sertich of Chisholm said Democrats worked to protect K-12 schools, nursing homes and aid to local governments from deep cuts. He criticized Pawlenty for not budging during budget talks.

"At the end of the day, we had to make a decision what was more important -- getting our session done on time and making sure that we had a balanced budget that worked, or to continue to fight and beat our head against the wall," said Sertich. "Ultimately we'll have a new governor next year, and there will be some different decisions."

But despite the tough talk from both sides, lawmakers and the governor actually pushed a big part of the budget problem into the next budget cycle. The education funding shift -- the largest in state history -- amounted to two-thirds of the solution.

Without deeper permanent spending cuts or permanent tax increases, the next two-year budget cycle -- for 2011-2013-- is already showing a projected deficit of close to $5.8 billion.

Rep. Jim Abeler, R-Anoka, voted against the budget bill because he didn't think lawmakers made the hard decisions necessary to actually balance the budget.

"When you're running for office this fall, you better tell people that they're not going to get a lot of the stuff that you were hoping to get to them, and they're going to get less things, because you're going to vote for this bill today," said Abeler, "and because we didn't do some of the work it would take to do some of the stuff thoughtfully and carefully."

The budget debate will extend into the campaign for governor. Rep. Tom Emmer, the Republican-endorsed candidate, voted against the measure. He wasn't involved in budget negotiations, but said there could have been deeper spending cuts.

"This will be the debate all summer long. They have framed it very well," said Emmer. "Are you ready to redesign government? Are you ready to put people back in charge of their own opportunities? Are you ready to start talking about these sacred cows that the people in the majority aren't willing to talk about redesigning?"

Emmer has suggested overall government spending could be reduced by one-third, but he hasn't offered specifics.

The DFL-endorsed candidate for governor, House Speaker Margaret Anderson Kelliher, helped craft the budget deal and voted for it. Kelliher clearly believes Minnesotans would prefer a tax increase over the cuts she thinks Emmer will propose.

"It seems like Tom Emmer has picked up what I like to always call the Tim Pawlenty budget ax, and his ax seems to be even larger," said Kelliher.

Gov. Pawlenty said he doesn't think it would be too difficult to fix the state's long-term budget problems. He said lawmakers should make his proposed unallotments permanent, pay back the school payments over several years and cut spending that was untouchable this year because of the federal stimulus.

But Pawlenty couldn't convince DFL legislative leaders to take those steps this year. And he made it clear it will be up to the next governor and Legislature to fix the budget problems they will face next year.

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