When I had a chance to interview Sen. Tarryl Clark yesterday on KNSI, I asked about the budget deficit and the decision to balance. Calling on this post, I asked whether these revisions would lead the Legislature to perhaps choose a mix of spending cuts and monies from the reserve that leaned more towards the latter. I intentionally did not say taxes, to not put words in her mouth to suggest she wanted to raise them. I cannot imagine the DFL wants to have two tax increases on its record this year. (They could prove me wrong, of course. But the size of the increase would not be large relative to the bad publicity, so I cannot see how it makes sense for them to go there.)

Governor Pawlenty is choosing a 40-60 mix.

The Governor�s budget solution reduces the growth in state spending by $341 million, uses $250 million of the $653 million budget reserve, and uses $250 million from the surplus in the Health Care Access Fund to maintain health care programs and eligibility for the disadvantaged.

There are some tax changes planned. Best news is a 1/8% cut in the state sales tax rate. That costs $77 million in the current biennium.

So you're thinking "wait! He got $841m in the paragraph above, but then spends $77m, and he needs $935m. Where's the rest of it?" There is some language in the last paragraph that indicates a couple of changes that, while maintaining the "no new taxes" pledge might be seen as a tax increase for at least one group:

The budget plan also includes a measure that will align Minnesota�s definition of a �foreign operating corporation� with the one used by the Internal Revenue Service and a program to collect money from individuals who owe back taxes to the state by matching data with financial institutions.

I'm waiting to read the full details before deciding he's moved first on the "close the foreign corporation loophole", but if not I'm not sure what that means. But the press release says "approximately 40% of the budget plan comes from spending cuts and additional revenues, 35% from balances or surpluses in non-general fund accounts and 25% from the state budget reserve." So there has to be somebody paying more.

Ah, here we are. The StarTribune details:

Pawlenty's proposal is at odds with DFL moves to increase aid to cities by $90 million and with bipartisan efforts to overhaul health care to increase coverage for under-insured Minnesotans.

The governor recommended paring $187 million from the state health and human services budget to make up for 20 percent of the shortfall in 2008-2009. Another $54 million would be cut from higher education.

Among the other steps, he proposed getting $102 million by doing away with a tax break that some corporations use to shield income from overseas operations.

Ugh. $54 million from higher ed. I guess I better start figuring out where to save some money in my office.

Altogether, though, a pretty good plan in my view, with a majority of money from temporary shifts and with a relatively light take on taxes, though I'm sure he's going to be dinged for closing the FOC tax break. We'll have that topic and more tomorrow on The Final Word.

UPDATE: Forgot to add the title.

Labels: Minnesota, Pawlenty