Budget crossfire: The incredible vanishing $2.6 billion

In the flurry of budget activity last week, most media gave short shrift to what may have been the most surprising number of all. On Tuesday, Gov. Tim Pawlenty’s presentation of his revised budget included a one-sheet summary that showed the state emerging from the 2012-13 biennium with a small surplus under his plan.

But when number-crunchers in the Minnesota House and Senate took a closer look at the governor’s full proposal, they discovered that the 2012-13 projections there contradicted the handout. Instead of an $8 million surplus, the full budget showed a $2.6 billion structural deficit based on the Department of Management and Budget’s estimate of ‘12-’13 costs under Pawlenty’s proposal.

It turned out that, compared to his full budget proposal, the governor’s one-sheet had slashed an additional $2.5 billion from health care for 2012-13 without further explanation, lowering the Health and Human Services line from $12.38 billion to $9.89 billion, a whopping 33 percent cut from projected ‘12-’13 spending levels under current law. (Pawlenty’s handout also applied lesser cuts to aid to cities and counties–$82 million–and to state government–$37 million.)

On Wednesday,Senate Majority Leader Larry Pogemiller and House Speaker Margaret Anderson Kelliher sent Pawlenty

a letter asking him which proposal was the real one. Kelliher also took a shot at a Thursday press conference, calling Pawlenty’s budget "a bit fake at this point" and suggesting that the governor’s handout was not prepared by the Department of Management and Budget (MMB).

She was right, as Curt Yoakum of MMB subsequently confirmed to PIM in an email: "The document that was distributed at the Governor’s press conference reflected his approach for balancing 2012-13. The document posted on our website is an estimate of the impact of his current proposals showing the planning estimates for FY12-13 if the proposal for the next biennium (FY10-11) is adopted."

To put it another way, the governor does mean to pursue another $2.5 billion in 2012-13 cuts but he has not proposed any means of doing it.

How did the governor’s office arrive at that $9.89 billion figure? It’s a direct transposition into the ‘12-’13 budget of his current ‘10-’11 budget for Health and Human Services–at a low base-line level established before all of this year’s one-time federal stimulus dollars are added to the equation. Last week Sen. Richard Cohen (DFL-St. Paul) said at a Senate
press briefing that there was simply no way to get to Pawlenty’s target
of $9.89 billion in the out years without revoking a number of statutes
currently on Minnesota’s books.

But many Democrats think Pawlenty’s announcement gambit was more PR gesture than policy proposal, and that the governor–even if he is still around in 2011, when the ‘12-’13 budget will be passed–does not want to bite off the wholesale dismantling of the state’s health care system. "He just used the Capitol press corps to put out a false message" about repairing the budget, in the words of one Senate staffer, "and the Capitol press corps doesn’t care."

The situation may become a little clearer at the end of the week, when legislators expect to receive more detailed information about the governor’s proposed cuts.