Tim Pawlenty's New Deal

How Minnesota's new governor set the table for this year's budget-slashing "crisis" in state healthcare spending

Consider the practical ramifications of eliminating GAMC, for instance. Though Pawlenty has said that some participants could be moved onto MinnesotaCare, many will simply end up with no health care whatsoever. And while that would shave perhaps $264 million from the budget right away, it could prove very costly in the end. Because the uninsured will continue to have medical emergencies--indeed, will have more of them once they are denied the ability to see a doctor as an outpatient--hospitals must either reduce service levels or pass the costs along to someone else. And that someone will be taxpayers in the core cities.

Hennepin County Medical Center and its associated physicians' practice group receive some $37 million a year from GAMC, according to hospital CEO Jeff Spartz. Regions Hospital in St. Paul provides $18 million in care to GAMC enrollees. Spartz is sure that the state budget problems mean that the Hennepin County Board of Supervisors is facing its own fiscal crisis and won't be able to find any extra money to help the hospital.

Compounding the problem is the fact that there are fewer and fewer so-called safety-net hospitals. Some 20 percent of HCMC's patients who come from outside Hennepin County make the trip because they cannot find care in their own communities.

"Eliminating GAMC, all that does is shift costs to Hennepin County taxpayers, because people will still show up at HCMC," says Minneapolis DFLer Linda Berglin, chair of the Senate's Health, Human Services and Corrections Budget Division. "Those people don't qualify for Medical Assistance. These are very low-income people, and when they have an accident we're not going to turn them away. Property taxes would have to pick up the slack, and people would come from all over the state."

At the same time, the number of people in need of state health care will only continue to rise. "Medical Assistance, unemployment insurance, and some other programs like that are supposed to get bigger in tough times," says Nan Madden, director of the Minnesota Council of Nonprofits' Minnesota Budget Project. "There's this idea that if we cut these programs, the problems will go away. And that's not true. They don't go away."

But Minneapolis DFLer Neva Walker, a member of the House Health and Human Services Policy Committee, is quick to point out that given the current political climate, anything that sounds remotely like welfare is an easy target. "Medical Assistance is probably going to be the population that's least able to organize around their issues," she notes. "It's spun in the media that single adults can just go to work. Well, then, it's hard to oppose those cuts."

Which, in Walker's view, is exactly the point. "There was a plan and a vision ahead of time," she says. "There are some people who have been waiting for this for a long time."


Faced with similar deficits, numerous other states--states without Minnesota's supposed legacy of caring for its neediest residents--are beginning to contemplate new taxes. Nevada governor Kenny Guinn, a Republican, has said it would be "political cowardice" for lawmakers to oppose nearly $1 billion in new taxes he hopes will cover a $700 million-plus shortfall and beef up education and human-service programs. A number of other states are proposing hefty hikes on cigarette and gasoline taxes.

In Minnesota right now, public opinion is running against any new taxes, but the Minnesota Budget Project's Madden predicts that will change. "Once the governor has to drop his budget on February 18, people will see what it really means to cut 15 percent from the state budget," she says. "And people will see what the effects are on their community. Once we're talking about specific consequences, people are going to see and no one's going to like it.

"And then it will be time to start to talk about raising revenue," she says. "It's time for the last resort. The consequences are severe enough; it's time to put revenue on the table."

And in fact some DFL policymakers are quietly speculating about ways to raise revenue that might be saleable politically. Some think that might be extending the sales tax to clothing. Others may revisit Ventura's idea of taxing services. A few are reminding colleagues that Republican governor Al Quie, faced with a similar conundrum in 1982, imposed a surcharge on income taxes. (Under such a scheme, all Minnesota taxpayers would calculate their state taxes and then add a certain percentage, say, 10 percent, to the total each year until the shortfall is eliminated.)

Social-services advocates would prefer that the income- and property-tax changes of the past five years simply be undone. Otherwise, they complain, Minnesota will be squeezing its lower and middle classes from both directions: Not only will they feel most of the pain of the cuts to services, they will pay a disproportionate share of the cost of what's left.

"In the past, states have cut their progressive taxes during good economic times but raised their regressive taxes in response to economic shortfalls," warns a recent report by the Minnesota Budget Project. "The result is that tax systems become more regressive over time--that is, low-income persons pay a higher share of their incomes in taxes than do upper-income ones. Our choices in raising revenues should be informed by their impact on low- and moderate-income Minnesotans."

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