As Pawlenty touts his budget record, critics point to failed one-time fixes

On the eve of Minnesota's current government shutdown, former Gov. Tim Pawlenty stood in front of a microphone at the Minneapolis-St. Paul International airport.

Returning from a meeting with lawmakers in Florida, a key state in the campaign for the Republican presidential nomination, Pawlenty stopped briefly to voice his support for GOP state legislators who have been staving off Democratic Gov. Mark Dayton's proposed tax increases.

Pawlenty also deflected questions about his role in creating the budget hole lawmakers are now struggling to fill.

"The last budget for which I was governor ends tonight at midnight, and it's going to end in the black; it's going to end with a surplus," he said. "And as to the next budget that has a projected deficit, it's based on a massive increase in spending that I would have never allowed as governor."

Minnesota's government shutdown has turned the spotlight on Pawlenty's fiscal record, a part of his political past that has become central to his run for the White House. He frequently promises that, if elected president, he'll cut spending as he did in Minnesota.

It's true that Pawlenty cut spending. Before he took office, Minnesota's biannual budget grew by an average of 21 percent. During his two terms, the average for each budget cycle was 3.5 percent — despite frequent opposition from the then DFL-controlled Legislature.

But the former governor's detractors say those cuts hurt the state's most vulnerable residents. They also note that he frequently used accounting measures that pushed Minnesota's financial problems down the road — tactics that have come back to haunt the state now.

Although he left the state with a surplus of $663 million for the last two-year budget cycle, Pawlenty does not mention that part of that surplus came from federal stimulus money — and that his legacy also includes a $5 billion shortfall projected for the biennium that started July 1.

Now, state lawmakers are trying solve the problems Pawlenty left behind, and it's landed them in a government shutdown, said Tim Penny, a former Democratic U.S. congressman and current co-chair of the Peterson-Pew Commission on Budget Reform.

"[Pawlenty] left us a legacy of 'leave it to the next guy,'" said Penny, who ran against Pawlenty in 2002 as an Independence Party candidate. "He talked a tough line about no taxes during his years in office, but the games and gimmicks he willfully employed to avoid taxes left us with a perpetual structural deficit."

STATE STILL FACES "STRUCTURAL DEFICIT"

The most recent forecast from Minnesota Management and Budget pegs state general fund spending at $39 billion and revenue at roughly $34 billion, a difference of $5 billion. Minnesota's shortfall is 18.8 percent of the state's general fund budget, the fourth-largest deficit in the nation according to the National Conference of State Legislatures.

In no small part, the gap is the result of two big fiscal decisions made during Pawlenty's last years in office: The acceptance of about $2.3 billion in one-time federal stimulus money and the delay of $1.9 billion payments to schools.

Typically, such budget gymnastics aren't a big deal, said Nan Madden, director of the Minnesota Budget Project, a St. Paul-based think tank. Nor is it unusual for policymakers to rely on them, she said.

"If you have a deficit that's only going to happen one time, it's not necessarily bad to have something that's a one-time solution," she said. "But if you have a forecast that shows ongoing deficits, you have to come back every year and find more one-time stuff."

Madden defined a structural deficit as when a state has more money going out than it does coming in on a regular basis. She said they're difficult to solve without a combination of deep spending cuts or tax increases.

That's where Pawlenty's critics fault him: They say that, despite several projected deficits, he repeatedly moved money around to create the illusion of a balanced budget, raiding the same pots of money instead of solving the state's long-term budget problems.

"A fiscally conservative governor would have ensured that there would be no deficit in the future," said Jay Kiedrowski, a former state finance commissioner and senior fellow at the Humphrey School of Public Affairs. "He used tricks to balance the budget. He didn't balance the budget in the long term."

SHIFTS AND ONE-TIME FIXES

The last biennium wasn't the first time Pawlenty made little cuts and shifts to make the numbers add up.

In 2004, when he presented his first budget, Pawlenty delayed a smaller school payment to state school districts, which the state delivered when it had a surplus in the following fiscal year. Also in 2004, he took $110 million from the Health Care Access Fund to balance the budget.

Pawlenty tapped the health care account for another $40 million in 2009.

During other budget years, he raised court fees by $200 million, drew $48 million from a fund meant to cover the costs of closing garbage dumps, and spent $10 million from a cache meant for transit projects.

Critics also point out that during Pawlenty's time in office, Minnesota reduced state aid to communities a total of $1.7 billion — one reason why local property taxes have been on the rise.

Pawlenty's supporters say his job wasn't easy. They point out that his tenure was marked by two recessions, and they also highlight the fact that Minnesota's population is aging and its workforce shrinking, meaning less revenue and bigger deficits.

The former governor also had to deal with stubborn Democratic legislators, said Pawlenty's former chief of staff Charlie Weaver.

"He would have liked to have cut more and [done] more reforms with education and health care, but the DFL majority wouldn't let us," he said. "He did what almost every other governor did in the county which was be creative and find ways to solve the problem without raising taxes."

Take costly health care programs. Rather than reform the system, Pawlenty had another aim in mind, said state Sen. Linda Berglin, DFL-Minneapolis, who frequently sparred with Pawlenty over health care programs.

"His major cost containment strategy was to limit or eliminate coverage," Berglin said. "That doesn't cover costs, it just creates more uncompensated care."

She points to Pawlenty's decision in 2009 to cut $381 million from the General Assistance Medical Care program, which helps insure low-income Minnesotans. Pawlenty wanted to move those patients into another state health care program, but critics, like Berglin, argued that the change would lead to uncompensated care.

After months wrangling over the cuts, Pawlenty agreed to support a scaled-back version of the program. His backers say it's an example of compromise on his part; there were many times Pawlenty softened his initial budget proposals.

"Of course he didn't always get his way," said Matt Kramer, another chief of staff for Pawlenty. "There had to be shifts, because there had to be compromises."

NEW PLAYERS, SAME SCRIPT

Today, the mood in the Capitol isn't that much different than it was during the fiery budget debates of Pawlenty's tenure. Dayton wants to trim spending but raise income taxes on Minnesota's wealthiest to help cover projected spending; the GOP has said it won't support revenue increases, but will endorse spending cuts.

And among all the numbers, there are few permanent solutions to be found.

For example, Republicans have floated the idea of selling tobacco bonds to raise an unspecified amount of money, an old Pawlenty plan that legislators rejected in 2009.

For his part, Dayton has said he would support an additional $700 million in delayed payments to school districts; Dayton and GOP legislators have already agreed to continue Pawlenty's delay through the end of 2013, saving the state about $1.45 billion.

None of these options will end the state's structural deficit, said Penny. Dayton is willing to cut spending, but he won't change the way programs operate, he said.

Republicans would rather make short-term fixes that support new revenue.

"They're still dancing away from an honest fix," Penny said. "Just hit replay. Nine years in a row we've had the same debate."

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