Gov. Tim Pawlenty made his yearly appearance at the Eden Prairie Chamber of Commerce last Thursday fresh off the combative legislative session that came to an abrupt and unsettled end. In the remaining hours of the session, the governor vetoed legislation that would have raised taxes on liquor and beer, credit card companies and would have raised taxes for those making $250,000 or more. With no special session set to occur, the remaining $2.7 billion budget gap was left to be balanced by the governor through the unallotment process.

“It is not wise to raise taxes during the worst recession in 60 years,” said Pawlenty during a press conference last week.
He continued to make his case during his visit to Eden Prairie.
Pawlenty said there was a school of thought in Minnesota rooted in the ’60s and ’70s that says the pathway to a brighter economic future is higher taxes and more government.

“This is not the 1970s. It is not the 1960s. We live in a very different world.

“This is now a hypercompetitive environment the likes of which we have not seen, and to suggest the pathway forward is the pathway backward, in terms of more taxes and more largesse in government, I don’t think is modern thinking.”

The unallotment process is still shaping up, and more details as to what further programs may be cut are expected in the coming weeks. Pawlenty is expected to cover some of the gap by a shift in school payments.

Though the school districts receive flat funding for the next biennium, payments would be delayed through a funding shift. Using the line-item veto, Pawlenty also cut $381 million in funding for the second year of the GAMC (General Assistance Medical Care) program, which serves single adults making less than $8,100 a year.
Minnesota is a generous state, but its social service and welfare systems “are off the charts” compared to the national norms, noted Pawlenty.

“It’s a reflection of our generosity but we also have to realize that we can’t have one part of the budget so out-running everything else that it impairs our ability to even modestly fund our other priorities.”

The GAMC program he vetoed was growing 35 percent a budget cycle, said Pawlenty.

Helping people in need is an important obligation, he said.
“But we cannot let it get so out of control that it impairs our ability to responsibility fund other key things we are also supposed to do,” he said.

Pawlenty added that this was not the outcome or path he would have chosen, “but it’s the path that we’re on.”

In an interview, Rep. Maria Ruud (DFL-42A) warned of the consequences of the veto to the health care program. Ruud, who represents a part of Eden Prairie, served on the Health Care and Human Services Finance Division and Taxes committees. She noted that the GAMC program serves the “poorest of the poor.” Those in the program who make $8,100 a year, she added.

“Many of them are homeless, 70 percent have mental illness or chemical dependency challenges,” Ruud said.

Dehumanizing those affected by the program has the unfortunate side effect of keeping legislators from having the public policy debate about why it makes good economic sense to provide coverage for these people, said Ruud.

“We just keep getting in this loop,” she added. The poor are thrown off coverage; they come in; they have problems; it’s expensive, it’s uncompensated – “it gets shifted to us, who have health care.”

Eden Prairie’s other legislators; Sen. David Hann (R-42) and Jenifer Loon (R-42B) were supportive of the governor’s action.
Leaving Pawlenty in a position of balancing the budget with line-item vetoes and unallotment is “not how the process should work,” said Loon.

On the other hand, she added, spending the additional money on a special session would not have been a good idea either.
“I think he made the right call” in terms of stopping the session, she said.

“It’s really good that we did not go to special session,” said Hann.
Hann said the unallotment decisions that were made will be reviewed and depending on the economy, “there may be some opportunities to revisit that.”

He added, “Burdening the economy with greater taxes and regulations is counterproductive.”

In terms of the vetoed proposal to raise taxes on those making more than $250,000 a year, Loon noted that she was not willing to support tax increases that would jeopardize the creation of jobs.
The new tax tier “would have affected many, many small businesses,” since the vast majority of small businesses in Minnesota run on personal income, she said.

Loon, in her first year at the Legislature, said the state needs to look at “wholesale reforms” of government programs. At the beginning of the session, “there was a lot of talk on both sides about zero-based budgeting where you kind of start with a blank slate and recreate programs from the ground up,” Loon said. “That didn’t happen.”

Loon said it’s not fair to ask people to pay higher taxes to continue programs that haven’t undergone necessary reform.

In terms of the effects of health and human services cuts, Loon said, “We do need to help people who have no other avenues for health care.”

But the GAMC program was on a track to increase by 35 percent, she added. “We can’t sustain that kind of growth.”

She said 75 percent in that program will likely qualify for Minnesota Care.

“Really what you’re talking about is largely people who are walking into emergency rooms and getting health care. Those people are still going to get care,” Loon said.

She said reimbursements to hospitals for care is “where the pinch is coming and that’s something that we need to address.”

Ruud said there are two problems with the argument that those in GAMC could move to Minnesota Care. First, the application process for Minnesota Care is too overwhelming for this group of people – “it’s beyond them.”

It will then shift people who are on Minnesota Care off of that program, Ruud said.

“The point of Minnesota Care was to provide affordable health care for working Minnesotans.”

Ruud was saddened that the Legislature couldn’t override the vetoes to the tax bill and GAMC.

“We voted against the poorest of the poor and then we voted to protect the richest of the rich,” Ruud said.

School funding was essentially held flat, though there will be about a $1.7 billion shift in the distribution of the funding, noted Hann.

The shift does put some pressure on local school districts to use reserves or do short-term borrowing to cover costs.
Hann said he had hoped this would be an opportunity for significant reform for schools.

One of his “pet peeves” is a law that requires districts to spend 2 percent of the general fund on staff development. Legislators set that mandate aside for two years.

“That’s a mandate that should be permanently repealed,” Hann said.
Legislators did not address another long list of mandates he hoped to tackle.

“We really didn’t get much focus on reform,” Hann said.

They finished in time, “which is good,” and did not raise taxes, he added.

“We did not take advantage of the opportunity to do some things that would have I think been positive going forward, in trying to reform some of the structures we have for spending,” Hann said.

Loon said she’s planning to sit down with school district and city officials “to talk about funding for programs and how Eden Prairie might be affected.”

She noted that the governor established a priority of trying to hold education harmless, “I agree with that.”

“That being said, really nobody was going to get an increase in this budget,” Loon said.

When you hold a school budget flat it means they have less money to spend because it does not account for inflation, noted Loon.
In terms of the shift in funding “for many districts it would mean that they’re getting less of their money when they anticipated it. So districts may have to do some short term borrowing until the rest of that money comes in.”

The Eden Prairie district won’t be affected in that way – Loon said district officials indicated that it could use the fund reserve. “Basically they could weather that situation,” she said.

Loon said it will take compromise to deal with a budget in these situations.

What the public saw was the result of two opposing sides. “There wasn’t a real effort to try to get folks to meet in the middle somewhere, and I hope we can do a better job next time,” Loon said.
Ruud noted that she didn’t come to raise taxes. She takes that very seriously.

“I also didn’t come to dismantle the state and the things that make Minnesota great,” Ruud said. Taxes hurt people, cuts hurt people, she said.

“We really try to strike the balance,” Ruud said.