Pawlenty Releases Budget Revisions

ST. PAUL, Minn. - Gov. Tim Pawlenty released his revised budget Monday -- a forecast that assumes cities will raises taxes to offset proposed cuts to local government aid .

Pawlenty issued his original plan in January, but updated it in line with a new economic forecast that was released earlier this month.

While Pawlenty insists he won't approve a state tax increase to close the state's $4.6 billion deficit, his Revenue Department projects that property taxes will increase $626 million over the next three years.

Revenue Commissioner Ward Einess says the forecast assumes that local governments will raise taxes to offset Pawlenty's proposed cuts in aid.

“This budget is lean and focused,” Pawlenty said. “In these tough economic times, we can’t do everything, but we will do what’s important to help get our state moving forward. For starters, government will live within its means and not pile a big tax increase on families and businesses who are already struggling.”

Some DFL leaders say that since there will be aid cuts, they should remove the 3.9 percent cap on property tax increases that the state imposed last year. Pawlenty opposes lifting the cap.

Notable changes to Pawlenty's January budget recommendations include:

K-12 Education

Revised budget includes using $424 million of federal stabilization funds for K-12 education funding, increasing Pawlenty’s K-12 funding recommendation to $14.1 billion.

Higher Education

Previously proposed reductions in funding for the University of Minnesota and the Minnesota State Colleges and University system would be restored. Pawlenty still recommends both university systems freeze or cap tuition hikes.

Pawlenty also recommends qualified students should receive increases in student grant funding due to an increase in the Pell grant program under the federal stimulus package.

Human Services

Certain eligibility related funding reductions would be delayed until January 2011, temporarily restoring eligibility for Medical Assistance as well as MinnesotaCare eligibility for parents.

Funding for Federal Stimulus Match and Reporting Requirements

Governor Pawlenty’s budget revisions recommend $10.7 million to ensure Minnesota is able to compete for and manage federal stimulus funds. This appropriation will be used for matching requirements in areas such as health IT, as well as yet to be identified state match requirements. A portion of these funds will be used to oversee and report the use of federal funds to ensure compliance with all applicable requirements.

Public Safety

The Governor recommends repealing the requirement that short-term offenders serve their sentence at the local level. Instead, short-term offenders will serve their time at Minnesota Department of Corrections facilities.

Exempting Unemployment Insurance Benefits from State Income Taxes

Pawlenty recommends exempting up to the first $2,400 in unemployment insurance benefits to individuals from state income taxes in tax year 2009 in conformance with federal law. This is a one-time $28 million dollar expense.

Additional Assistance for the Courts

Pawlenty recommends an additional $10 million for the operation of the courts. This is one time funding for fiscal year 2010-11.