‘Nothing is off the table’

Minnesota is facing what might be its worst budget deficit ever, Gov. Tim Pawlenty announced Thursday at a Capitol news conference, a sign that the financial crisis has continued to tighten its grip on the state.

The shortfall is projected to be $5.2 billion — or nearly 14 percent of the state’s budget —for the current 2008-2009 biennium and the one to follow in 2010-2011. Minnesota’s constitution requires that the government balance the budget at the end of each two-year period.

For the 2010-2011 biennium the projected deficit is $4.8 billion and for the current biennium it is $426 million, a number that dwarfs the state’s current yet small budget surplus.

The deficit almost certainly means deep cuts for state programs, which could come in anywhere from health services to higher education, although Pawlenty and DFL leaders were both hesitant to explain what might be first on the chopping block.

Despite the lack of details, budget cuts can often find their way to higher education institutions. The state of Washington, for example, faces a similar budget deficit — $5.1 billion — and the higher education system there was warned to prepare for 20 percent cuts, University of Washington spokesman Norm Arkans said

Although where the cuts will come from remains to be seen, it is clear the cuts will be significant.

“This is not going to be easy,” House Speaker Margaret Anderson Kelliher, DFL-Minneapolis , said at the Capitol. “This is not work for the faint of heart.”

While Pawlenty pointed to a need for the state government to reform and streamline as well as a decline in state revenue as a “major factor” of the deficit, he also maintained his long-held pledge to not raise taxes.

“This is going to be a time of dramatic change,” he said. “It will be hard.”

Still, he was optimistic that if the state could learn to live within its means the problem could be solved.

“We cannot have an expectation of increase,” Pawlenty said of “built-in” annual budget increases. “That doesn’t work anymore.”

Kelliher, joined by Senate Majority Leader Larry Pogemiller , DFL-Minneapolis, Senate Assistant Majority Leader Tarryl Clark , DFL-St. Cloud, and House Majority Leader Tony Sertich , DFL-Chisholm, pointed to a lack of jobs as the reason for the deficit.

“The biggest factor is a lack of jobs,” Kelliher said, calling for investment in research and development that, she said, would eventually strengthen Minnesota.

Investment does come with a price, though; Kelliher said the Legislature “will probably have to cut deeper for research and development.”

"Nothing is off the table,” Sertich said.

Pogemiller, whose district includes the University of Minnesota, called for new leadership in job development.

“These are serious times for serious people,” he said.

Budget deficit and the ‘U’

University Vice President of Budget and Finance Richard Pfutzenreuter said he and President Bob Bruininks were already working with various hypothetical economic models in preparation for a cut in funding from the state; the current projection far exceeded anything for which they were planning.

He added that he was worried what a cut in higher education funding could mean for the state of Minnesota.

“If you take a meat axe out and cut education, you are cutting the future of our state, not just the University,” Pfutzenreuter said. “We’ve got to get Minnesota back on track to economic prosperity. We know one way that happens is through education.”