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Don Davis, Forum News Service, Published May 08 2010

Minnesota faces financial crisis

ST. PAUL – Minnesota faces a fiscal emergency, state policymakers said Friday, and Gov. Tim Pawlenty hinted he may call a special legislative session after the regular one ends in a little more than a week to finish budget work.

There was no progress in fixing the problem two days after a state Supreme Court ruling threw out Pawlenty’s 2009 budget cuts.

Pawlenty and lawmakers enter the last week of the 2010 legislative session this weekend further apart than ever with a $3 billion budget deficit to fill.

The Republican governor issued an executive order Friday blaming legislators for not enacting a balanced budget and ordered his key financial aide to prepare for a cash shortage. He met with his commissioners in a private session to tell them to come up with ways to slow spending.

The fact that Minnesota faces financial problems is one of the few things on which Republicans and Democrats agreed. They also agreed that state government is not facing a shutdown, something Pawlenty’s spokesman said on Thursday.

State officials fear Wednesday’s court ruling could encourage more lawsuits and drain the state budget, leaving too little money to pay bills.

The high court said that Pawlenty acted illegally last summer in cutting $2.5 billion from the state’s $30 billion, two-year budget. Another $200 million that he cut was not affected by the court decision.

The cuts came after the Legislature and Pawlenty could not agree on how to plug a budget deficit a year ago.

Since summer, the deficit has grown $536 million more, leaving a $3 billion deficit.

Technically, the court ruling was about a $5.3 million program that provides special diets to nearly 4,000 poor Minnesotans, but Pawlenty and other state leaders are treating it as if justices overthrew most of his actions.

The concern comes from the possibility that other organizations that lost money to the Pawlenty action may piggyback on the diet court case and demand money they would have received if Pawlenty had not made the cuts. Local governments that sustained many of the cuts have indicated they do not plan to sue, but other groups may.

The governor wants the Legislature to just approve the spending cuts he made and the court overturned. But Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, said that the votes are not there to pass the plan.

The House spent Friday afternoon debating whether to ratify the unallotment actions, but not all Republicans could support their fellow Republican governor’s plan.

“If there is not the support in the Legislature to do this proposal, we will have to find a new proposal,” House Majority Leader Tony Sertich, DFL-Chisholm said.

Sertich and Pogemiller have talked about increasing revenues, which generally comes in the form of higher taxes, but neither said what taxes they might increase.

A year ago, lawmakers sent Pawlenty a tax increase at the end of the session.

He vetoed it.

The House debated last year’s $1 billion tax plan that included many tax increases again on Friday, defeating it 129-2.

Rep. Morrie Lanning, R-Moorhead, joined Pawlenty in criticizing Democrats in control of the House for not producing a full budget plan with just days left to work this year.

Some Democrats sounded like they did not expect a deal with Pawlenty.

“We are preparing to do it without his assistance,” Pogemiller said, but he pledged to continue negotiations although no talks were held Friday after Pawlenty and legislative leaders met twice on Thursday.

Pawlenty said the situation remains gray and he could offer no specifics about how the state may deal with its newest financial problems. He suggested that some grants could be canceled or delayed and there may be some payments the state can make late.

House Speaker Margaret Anderson Kelliher, DFL-Minneapolis, said that the governor does not have the power to just quit spending money that has been appropriated. Pawlenty said that is one of the things his staff is investigating.

Davis reports for Forum Communications Co.