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Minnesota Legislature

State of the State: Laying out his recovery plan

Published (2/11/2010)
By Patty Ostberg
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Gov. Tim Pawlenty, center, glances up at his wife, Mary, after greeting House Taxes Committee chairwomen Ann Lenczewski as he leaves the House Chamber after presenting his final State of the State address to a joint session of the Legislature Feb. 11. Pawlenty thanked his wife, during his address, for her service to the State of Minnesota. (Photo by Tom Olmscheid)Gov. Tim Pawlenty mixed in a little humor while offering suggestions on how to help Minnesota’s sobering economy recover from the recession.

Pawlenty opened his final State of the State address Feb. 11 by recognizing the Red Bulls of the Minnesota National Guard and their return home this week.

Before moving onto his familiar themes, such as reducing corporate and personal income taxes, reducing government spending and performance pay for teachers, Pawlenty took a few jabs at himself. He lightheartedly offered advice to the myriad of legislators running for governor seated in the House chamber: “First, schedule a monthly haircut to manage your mullet … and before you take the microphone at a Minnesota Wild game, carefully practice pronouncing the word ‘puck.’”

Economy

Pawlenty reiterated his belief that the state’s tax system is prohibitive to job growth, saying the state’s business tax climate ranks eighth-worst in the nation.

He said the answer lies in a six-part package of cuts and incentives. Called the “Jobs Creation Bill,” it is a plan for:

• a 20 percent reduction in the corporate tax rate;

• a 20 percent exclusion from taxation for small businesses;

• an angel investment tax credit to provide incentives for investing in early-stage companies;

• a supercharged research and development tax credit;

• a capital gains exclusion for qualified investments; and

• incentives for companies to invest in Minnesota small business.

He urged lawmakers to improve and renew the JOBZ program, and pass a CARZ program to offer tax incentives at the Ford plant in St. Paul, thus potentially saving 750 jobs.

Education

“Persistently low achieving schools need new leadership, new authority, and new teachers hired and assigned based on performance, not seniority,” Pawlenty said.

He asked teacher unions to support the “Teaching Transformation Act” that, he says, would improve teacher quality, training and accountability. It would link teacher pay to student performance, set tougher minimum entrance requirements for admission into teacher preparation programs and create a program to recruit mid-career professionals to teach in high-need subject areas such as math and science.

Also under Pawlenty’s plan, tenure should be renewed every five years and should be based on evaluations linked to student performance.

Government

“We need to reduce government spending because it leads to job-killing tax increases,” Pawlenty said.

State government spending has escalated an average of 21 percent every two years between 1960 and 2003, the year he became governor, he said. He credited the increase to both political parties.

Government spending not only needs reduction, but should be held accountable to the current revenues it’s collecting, he noted. Pawlenty is proposing a constitutional amendment that would require future spending committees to not exceed current revenues.

He emphasized the controversial unallotments he made in 2009 cannot afford to be restored and he will reveal his plan to deal with the additional budget deficit Feb. 15. The November forecast projected a $1.2 billion deficit in the current biennium, which ends June 30, 2011.

“Military, veterans, core public safety functions and K-12 classrooms will be protected. Nearly all other areas will be proposed for reduction,” he said.

Health care

Pawlenty acknowledged the health care reform passed in Minnesota that has improved overall health care costs and quality. “Minnesota is leading the country in paying for better health outcomes rather than just the volume of procedures. We’re moving from a system of ‘sick care’ to a real ‘health care’ system.”

Changes he proposes include allowing consumers to buy health insurance across state lines, which proponents say increases competition thus lowering costs. He noted that currently three health plans in the state control “almost all of the health care market.”

He also called for an overhaul of the publicly subsidized health care systems of MinnesotaCare and Medical Assistance, saying the costs are “out of control.”

Majority responds

DFL leaders support at least two gubernatorial proposals: the angel investment tax credit and the CARZ tax incentive proposal. However, House Majority Leader Tony Sertich (DFL-Chisholm) thinks the governor “set the wrong tone” by failing to acknowledge legislative initiative on similar ideas.

Sertich said Sen. Ellen Anderson (DFL-St. Paul) introduced a bill last year to help the Ford plant stay open.

Otherwise, the DFL leaders indicated the governor’s proposals are too little, too late.

Sertich criticized what wasn’t in the speech, namely, Pawlenty’s 2009 veto of GAMC funding, which Sertich said the governor had indicated then was “a signal to try to fix the problem. We heard nothing about him trying to fix that problem.”

DFL leaders also said the speech failed to adequately address the budget deficit, which they say is the key issue concerning lawmakers.

“If you take all of his tax proposals and add them up, it grows the deficit by hundreds of millions of dollars,” noted Sertich.

“To me it does sound like the axe is back as a budget-cutting tool and that is going to be of concern to a lot of Minnesotans, that it’s not done with an idea of strategic investment or an eye to the future.” said House Speaker Margaret Anderson Kelliher (DFL-Mpls).

If the governor is serious about the constitutional amendment proposal, said Senate Majority Leader Larry Pogemiller (DFL-Mpls), “I would hope his Monday budget reflects that constitutional amendment, and I think that would be a fair standard to set.”

While agreeing job growth is a priority, Pogemiller noted that the Office of the Legislative Auditor’s critical evaluation of the JOBZ program indicates the program is “not working as well as it could.” He suggested that appointing a replacement for Dan McElroy, commissioner of the Department of Employment and Economic Development, would be a “legacy” Pawlenty could leave the state.

— Staff writer Kris Berggren contributed to this story.

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