While the governor’s recent proposals to solve the looming $6 billion state budget deficit do not include any tax increases, as he promised, his plan comes up short on lasting solutions. The governor’s plan relies on one-time (and indeterminate) bailout money from the federal government, borrowing and tapping the cash reserves of the Health Care Access fund. These are all stopgap measures that may or may not help solve the current biennium’s budget woes, but do nothing to provide needed long-term stability in the state's finances.

While the governor’s plan relies heavily on these one-time stopgap solutions, there are some spending reductions in the package. The governor has proposed approximately $2.3 billion in spending cuts. All major areas of the state budget are slated to be scaled back except the two largest budget items, K-12 education and Health & Human Services. Those two items combined make up almost 70% of the general fund budget and the governor proposes increased spending in each. K-12 education is slated for a funding boost above and beyond the current budget plan. Governor Pawlenty proposes a permanent per-pupil formula increase of $300 or 5% to get districts not utilizing his performance pay plan, “Q Comp,” on board with that program. He’d also like to give high-performing districts a 2% bump in the general education funding formula. Health & Human Services would get a 9.6% increase over the current biennium.

$287 million in tax cuts are also included in the governor’s plan, with the objective of creating and preserving jobs. He proposed a reduction in the state’s highest corporate tax rate, providing an up front sales tax exemption for new business equipment purchases and accelerated write-off of the depreciation tax deduction on such equipment. These seem like good ideas to try to stave off or reduce the impact of rising unemployment (presently projected to exceed 10% by the end of the year).

There are some positive aspects of the governor’s budget proposals, but the overall plan misses an opportunity to examine the entire state budget situation and make permanent reforms to create a common sense and sustainable budget that wouldn’t go out of whack every other biennium. It’s a temporary political move designed to, as much as possible, maintain the status quo without hiking taxes. Even if all the what-ifs fall in to place and the current budget crisis is dealt with by these proposals, the same ugly problem will resurface in the 2012-2013 biennium. In that respect, the governor’s critics are justified in accusations of band-aid solutions and budgetary gimmicks.

It’s past time Minnesota face reality and wrestle with our out of control spending problem. Budget increases are on auto-pilot, and growing at a rate that far outpaces normal inflation. The present course is unsustainable. The sooner we can change the budget’s tack, the better.

Take Action: Submit your budget-balancing ideas and comments at MinnesotaBudgetSolutions.com.

Additional Resources

• Click here to listen to former state audior, Pat Anderson discuss the budget situation on the Dan Conry Show (MP3).
• Press Release: Governor Pawlenty Presents Balanced Budget that sets Priorities and Positions Minnesota for Success.