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January 20, 2003

Pawlenty faces 'worrisome' budget opposition

Dane Smith
Star Tribune

Jan. 19, 2003

Legislators are not out of the Himalayan foothills yet, and some members of their mountaineering expedition already are losing sight of the summit, the way Gov. Tim Pawlenty sees it.

As he started Minnesota last week on a climb he described as the "Mount Everest of budget deficits," Pawlenty proffered a mix of first-round cuts that he thought would be easily understood as nonessential government spending, and also unsparing of traditional Republican business allies.

Among the first targets were Highway Helper trucks (might have to change your own flat tires, he said), subsidies for ethanol production (benefiting an industry that he said should be weaned from them), and the capture of most of the unused money in an Iron Range business development fund called the 21st Century Minerals Fund. (It is just sitting there, he said.)

By the end of last week, at least one of Pawlenty's Republican friends in the Legislature had spoken against the Highway Helper and ethanol cuts. And the Senate DFL majority was on the verge of rejecting both the cuts in ethanol subsidies and the cuts in the Minerals Fund.

Senate Minority Leader Dick Day, R-Owatonna, said in an appearance with other legislators a week ago that free state roadside assistance on freeways was a good idea and a congestion fix.

House Speaker Steve Sviggum, R-Kenyon, was trying to lead an effort by GOP corn-belt legislators to restore at least some of the ethanol subsidies.

And Senate DFLers, ever responsive to their Iron Range base, were pushing through budget-balancing bills with about $100 million less than Pawlenty wanted overall, and without the $39 million that Pawlenty sought to transfer from the Minerals Fund.

None of these blows by itself presents a grievous problem for the brand-new governor. Pawlenty may yet prevail in negotiations on most fronts, and in two weeks he probably will have a House-Senate agreement on Phase One and a balanced budget through June 30, the end of this fiscal year.

But the rapid removal of major elements of his package, along with restoration of such things as funding for county fairs and folk art, presents a troubling preview of mid-February, when Pawlenty will submit a plan for a deficit more than 10 times as large as this year's $356 million shortfall.

Pawlenty, fresh from 10 years in the Legislature, said that he expected as much but that the business-as-usual opposition was starting to get "worrisome."

And he was honing a stern sermon on behalf of a state that he says made itself clear in the last election and in recent opinion polls: Cut spending, and don't raise taxes to balance the budget.

Not kiddin' around

"This is a crisis; we're not kiddin' around," Pawlenty told the Star Tribune in a interview in his office at week's end. "It's not some sideshow; it's not some game. We're in the midst of a financial crisis the likes of which the state has never seen."

Although the easygoing new governor has taken pains not to threaten or demean legislators, as his predecessor sometimes did, he came close to scolding those who think that much of anything can be spared in reconciling a $4.56 billion shortfall projected through 2005.

"We have people who are not going to take this seriously, who are going to duck and bob and weave," Pawlenty continued. "People are going to want to select certain things. But the bottom line is that when the dust settles, with the possible exception of K-12 education, everything's going to take a hit.

"Legislators have entered a new world, and some of them don't realize that. We cannot balance this budget by just sandpapering down the programs."

Senate DFLers and House Republicans insisted that they are moving fast and are fully conscious of the coming pain.

House Majority Leader Erik Paulsen, R-Eden Prairie, said that the House's bottom line will look a lot like Pawlenty's and that perhaps only about half the proposed ethanol cuts would be restored.

Senate Majority Leader John Hottinger, DFL-St. Peter, contended that the Senate's smaller package nevertheless restored more in reserve funds than does the Pawlenty plan. He said the Senate, which beat the House to the punch in passing a bill out of committee, "moved swiftly" but wanted to be "more deliberate about any wholesale cuts."

Pawlenty suggested that both majority caucuses might have misunderstood that his package was designed to "touch a wide variety of groups and interests."

Our value system

Critics argued that the first round of cuts, specifically to the ethanol subsidies and the Minerals Fund, unfairly targeted outstate Minnesota. Finance Commissioner Dan McElroy responded that the state agency budget cuts weighed much more heavily on metro areas and that the overall burden was fair.

Pawlenty said that he actually has supported ethanol subsidies and the Minerals Fund, but that these are different times.

"Most [ethanol] plants are profitable, and by reducing their subsidies the only impact is they're going to be a little less profitable. . . . As we think about our Minnesota value system, are we saying it's more important to be the guarantors of a higher level of profit for certain private business people? Or is it more important to preserve programs that help poor children and Grandma in the nursing home?

"I don't want to have a situation where we value the balances in unused funds, or profits for private business people, over needy Minnesotans," said Pawlenty, sounding almost like a DFLer.

Although rural legislators and interest groups quickly coalesced to make a case against the cuts, Pawlenty received support from some quarters. The Taxpayers League of Minnesota, a group that prides itself on consistency in opposing government growth and high taxes, praised Pawlenty.

The group's legislative director, David Strom, said there were two laudable themes to Pawlenty's proposal: "scaling back government subsidies to private businesses and removing the stranglehold of the public-employee unions."

By taking aim at business subsidies in the first round, Pawlenty may cushion himself against criticisms that later cuts are too hard on middle-or low-income citizens. And Pawlenty said legislators need to develop thicker hides and face the fact that they will draw cascades of protest from every direction.

"The advice I would give them is you can't worry about this or that bill, or this bad vote, because by the time the recession is over you're going to have so many difficult votes that one or two or 10 isn't going to matter.

"You will have to stand up in front of the state of Minnesota, politically naked, and say 'You're right, we cut everything, but we had to do it because we're in a time of crisis.'

"You've heard me say this until you're sick of it, but the revenues coming into Minnesota right now have returned to historic averages," he said. "A 6.6 percent revenue growth this coming biennium is not aberrational; it is not abnormal. . . . We're just not pulling in the money from the mirage of the late 1990s. . . . This is what happened from building up spending patterns and structures based on an economy that could not be sustained."

Adding to his growing list of crisis metaphors, Pawlenty said legislators need to grasp "a new reality -- we've landed on the shores of a new country, and the boats are being burned."

 

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