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First Reading: No easy fixes

Published (5/29/2009)
By Nick Busse
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Gov. Tim Pawlenty delivers his State of the State address to the Legislature Jan. 15. (Photo by Tom Olmscheid)The 2009 legislative session began and ended in uncharted territory.

When the 86th Minnesota Legislature convened Jan. 6, lawmakers faced the unenviable task of solving the biggest budget deficit in state history. Tax receipts were tanking, unemployment was nearing record levels, and State Economist Tom Stinson was predicting the worst economic recession since World War II. Despite all this, legislative leaders promised to balance the budget on time and bring the session to a successful close.

Whether they accomplished this depends on whom you ask.

Here are the facts: by the final week of session, lawmakers had passed, and Gov. Tim Pawlenty had signed, all the necessary legislation to fund state government for the next two years. Lawmakers had also passed tax increases and K-12 payment shifts needed to pay for the budget bills they sent. So far, so good.

But legislative leaders and the governor couldn’t reach an agreement on how to pay for the appropriations. Arguing that increasing taxes during a recession would harm the state’s economy, Pawlenty vetoed the Legislature’s tax proposals, leaving an approximately $3 billion gap between state spending and revenues. Some saw the state careening toward a special session.

Things change quickly at the Capitol, however. In an unprecedented move that stunned legislative leaders, the governor announced on May 14 — four days before the end of session — that he planned to take “executive action” to balance the budget himself. Having all the necessary budget bills in his possession, the governor said he would simply sign them and then use his authority to unallot state spending to close the remaining budget gap.

Budget talks continued following the announcement, but quickly lost momentum, with each side accusing the other of having thrown in the towel on negotiations. DFLers and Republicans seemed to interpret Pawlenty’s announcement differently. Members like Rep. Paul Kohls (R-Victoria) saw it as a “backstop” to prevent the need for a special session; House Speaker Margaret Anderson Kelliher (DFL-Mpls) saw it as “bullying” and took it as a sign the governor wasn’t willing to negotiate in good faith.

Finance Commissioner Tom Hanson discusses the February budget forecast at a March 3 press conference along with State Budget Director James Schowalter, left, and State Economist Tom Stinson. (Photo by Tom Olmscheid)On May 18 at midnight, lawmakers adjourned the 2009 session without an agreement.

“We did continue to try to negotiate with the governor right up until the end. … But in the end, I think the chasm was just a little too wide to actually just scale easily,” Kelliher told reporters shortly after the House adjourned.

In the coming weeks, Pawlenty will announce his plans to close the remaining budget gap. He is expected to delay payments to K-12 schools and to cut roughly $1 billion from various state programs. He has yet to announce what will be cut.

Whatever happens, Pawlenty has made one thing clear: there will be no special session.

“The legislators are gone, and they’re not coming back,” he said.

A session of firsts

Before the session began, many had predicted a virtual repeat of the 1981-82 biennium. Then, as now, Minnesota had a DFL-controlled Legislature, a Republican governor, a battered economy and a record budget deficit. That situation resulted in six special sessions, and was ultimately resolved with budget cuts and — despite the reluctance of Gov. Al Quie — tax increases.

With Gov. Tim Pawlenty’s seat empty, the Legislative Commission on Planning and Fiscal Policy questioned, from left, Revenue Commissioner Ward Einess, Finance Commissioner Tom Hanson and Human Services Commissioner Cal Ludeman May 16 on the effects of line-item vetoes and unallotment. (Photo by Tom Olmscheid)Despite the outward similarities, the 2009 session proved to be a radically different scenario. It wasn’t just that the deficit was bigger — though it was, a lot bigger. In December, Finance Commissioner Tom Hanson announced the state was facing a projected $4.8 billion budget shortfall. By the time the February Forecast was released, that number had been revised upward to $6.4 billion; however, it was announced that $1.8 billion in fiscal stabilization funds from the American Recovery and Reinvestment Act of 2009 could be used to whittle the deficit back down to $4.6 billion.

Lawmakers and the governor came up with very different proposals to close the remaining gap. Pawlenty, who saw the deficit as an opportunity to shrink state government, remained steadfast in his opposition to tax increases. Instead, the governor proposed budget cuts, payment shifts to K-12 schools and a controversial plan to sell $1 billion of future revenues from the state’s decade-old tobacco settlement.

It didn’t take long for DFL leaders to rip into the governor’s “tobacco bonds” proposal, which, as they pointed out, would have cost the state some $600 million in interest over the life of the bonds. Instead of the one-time tobacco money, DFLers proposed a package of tax increases that would raise $1 billion, providing a permanent revenue stream — along with a series of budget cuts that went even deeper than the ones proposed by Pawlenty. DFL leaders said it represented fiscally responsible budgeting; Republicans called it “the worst of both worlds.”

But before DFL legislators offered their own budget proposals, they went on an unprecedented “listening tour,” holding town hall-style meetings at various locations across the state to get public input on budget solutions. Both DFL and Republicans legislators attended the meetings that were part of a first-of-its-kind effort by legislative leaders to add openness and public scrutiny to the normally esoteric process of building the state’s budget.

In addition to the listening tour, DFL leaders made extensive use of a previously little-known legislative panel — the Legislative Commission on Planning and Fiscal Policy — to shed public light on budget negotiations between the Legislature and the Pawlenty administration. During the final week of session, the commission met on an almost daily basis to flesh out the governor’s budget proposals live, in front of a public audience, and on television.

Republicans criticized both the listening tour and the commission hearings, arguing they amounted to public grandstanding and an ineffective use of time; DFLers defended them as an important measure of accountability.

“Another important part of this was doing things more publicly,” Kelliher said. “There was more transparency; I think that actually leads to more accountability. It was important to us to hold public hearings…”

That public process is expected to continue during the interim, when Kelliher said the Legislature will hold hearings on the governor’s unallotment plans.

Whether the session was a success or a failure probably depends on how you define those terms. Kelliher and DFL leaders point out that they sent the governor a balanced budget. It was his choice, they say, to veto their proposed revenue increases. Republican leaders denounce the DFLers for passing tax increases they knew the governor would veto. Either way, it’s done, and there is always next year.

The Minnesota House and Senate are scheduled to reconvene at noon on Thursday, Feb. 4, 2010.

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