Economy worse, but governor ups spending in revised budget plan

Gov. Tim Pawlenty's newest budget plan increases education, courts and other spending, despite a worsening economy.

And he still opposes raising state taxes, although Democrats say his policies would force nearly $2 billion higher local property taxes.

News early this month that the budget slipped $2 billion deeper into deficit was more than offset by federal economic stimulus money, so his new budget plan differs relatively little from his first proposal. However, Democrats took off the gloves after weeks of criticizing Pawlenty's budget around the edges, saying his plans would be disastrous for the state beginning in 2012.

Pawlenty's new budget plan for 2010-11 would slightly increase spending for public school education, higher education, Local Government Aid and public safety. However, it would cut state-run health programs $1.4 billion.

The Republican governor's new budget plan calls for spending $32.6 billion the two years beginning next July 1, compared to a $33.9 billion current budget. The budget deficit would be $6.4 billion without more than $2 billion in federal funds.

"In these tough economic times, we can't do everything, but we will do what's important to help our state moving forward," Pawlenty said. "For starters, government will live within its means and not pile a big tax increase on families and businesses who are already struggling."

Education is the biggest winner in the new budget plan, thanks to federal money.

Public school education would receive $27 million more under the new plan than Pawlenty's initial plan, for a total of $14.2 billion in the next two years. Higher education would do even better, getting $304 million more than planned just two months ago, meaning it would receive the same in the next budget as it does now.

"The governor recommended ... to restore all of the reductions to higher education, which is good news for Northwest Tech and Bemidji State University," said House Minority Leader Marty Seiftert, R-Marshall. "That is very, very important for the towns where the universities are."

In doing so, the governor renewed his request that both higher ed systems freeze or cap tuition increases.

While Pawlenty at least holds education funding even with the current budget, Senate Democrats have called for a 7 percent state budget cut across the board, including in education. Federal money could be used to soften the blow, but Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, said that education must deal with smaller budgets like every other state-funded program.

The most controversial part of the budget is Pawlenty's plan to cut health spending.

Human Services Commissioner Cal Ludeman said the Pawlenty budget encourages poor Minnesotans on state programs to use clinics more and emergency rooms less. A doctor's office visit costs less than one to an emergency room.

Hospitals would lose "tens of millions of dollars," Ludeman said.

The governor's proposal would chop $1.4 billion from his earlier $11 billion health and human services budget, in part because of the plan to divert patients from emergency rooms.

"The governor's funding for the next biennium assumes there will be no growth in health care, which is not only unrealistic, but statistically impossible," Rep. Tom Huntley, DFL-Duluth, said of Pawlenty's 2012-13 spending plan. "Once again, Gov. Pawlenty imposes a disproportionate share of cuts on health care - causing harm not just to thousands of hard-working Minnesotans, but also to our struggling health care industry."

Pogemiller said Pawlenty's 2012-13 health budget is 35 below what was projected.

"It's going to decimate our hospitals - and not just rural hospitals," House Majority Leader Tony Sertich, DFL- Chisholm, said.

Senate Democrats propose 7 percent across-the-board cuts and $2 billion in tax increases to balance the budget. Pawlenty reinforced his strong opposition to tax hikes on Tuesday.

House Democrats plan to release their budget proposal later this week, and it is expected to fall between the one from Pawlenty and the Senate.

Other items in Pawlenty's proposal include:

-- Softening opposition to a public works funding bill. He earlier said that he opposed borrowing money for construction projects unless state money was required to match federal funds, but on Tuesday Pawlenty left the door open to a solely state-funded package.

-- Spending $8.2 million in the next budget to keep short-term offenders in state prisons instead of forcing local jails to house them for less money than it costs counties. Corrections Commissioner Joan Fabian said about 200 short-term prisoners a day now are housed in county jails.

-- Exempting up to $2,400 in unemployment insurance benefits from state taxes.

-- Providing the courts $10 million more than his earlier budget. The court had asked for more money, but Pawlenty said employees in the court system can do without raises, as he asks of other state workers.

-- Slightly increasing Local Government Aid program spending in the next budget, compared to his earlier plan, but it still would be reduced about 10 percent a year. City leaders say that is unacceptable.