Gov. Tim Pawlenty released plans Monday to close a $1.2 billion state budget deficit, relying on hoped-for federal funding and further cuts to healthcare and welfare programs. He additionally proposed dramatic, long-term reductions to city and county aid that could reshape the way Minnesota's local governments do business.
Pawlenty proposed $825 million in cuts, including $250 million in aid to local governments. And to cover the rest of the state’s deficit, he added $387 million in additional federal healthcare spending, even though Congress has not passed the aid.
According to Grand Marais City Administrator Mike Roth, the city could end up with less Local Government Aid (LGA) than it takes to buy a pick-up truck. The 2010 certified LGA was to be $170,000. The governor last year unalloted $73,000 of that and his current proposal would take another $79,000 from the total allotment. “That leaves us $17,000 in Local Government Aid,” said Roth.
The story is just as dire for the county. According to statistics released by the Association of Minnesota Counties, Cook County had $149,598 unalloted from its County Program Aid (CPA) for 2010 last year. The current reduction would reduce the CPA by another $125, 919. According to Auditor-Treasurer Braidy Powers, this would leave Cook County with zero program aid.
The cuts to local government aid and other payments to cities and counties are bound to be controversial. Pawlenty proposes the $250 million reductions for each of the next three years, shrinking a $2.1 billion program that sustains small towns and big cities alike by keeping local property taxes low.
Pawlenty also called on the Legislature to make his 2009 unallotment budget cuts permanent. Combined with Monday's recommendations, he said that would reduce the projected $5.4 billion deficit in 2012-13 by nearly $3 billion.
On the other hand, the Governor’s budget also includes a 20 percent reduction in the corporate tax rate, and a 20 percent reduction in small business taxes.
The DFL will offer its own proposal for solving the deficit after a new budget forecast is released on March 2. The party criticized Pawlenty for proposing to cut aid to local governments while insisting that he’s holding the line on public safety. The final budget picture may not be clear until the end of the Legislative session on May 17.