Minnesota Held Hostage

How the governor's political aspirations are preventing a budget deal

During his deficit-laden two-and-a-half-year tenure as governor of Minnesota, Tim Pawlenty's boyish affability has been his most formidable political asset. The 44-year-old Lutheran and U of M graduate has demonstrated a sure intuitive grasp of old-school Minnesota provincialism that befits the former hockey-playing son of a South St. Paul milk truck driver. He exudes an unpretentious confidence that seems informal but not callow or cavalier. Pawlenty's down-home bona fides and open manner have won him a great deal of slack with the state's press corps along the way. When news of his association with a dubious-seeming telecom venture broke during his first year in office, Pawlenty sat down with the capitol press corps for more than two hours, simultaneously acknowledging and downplaying his relationship with the firm. During that sit-down, he volunteered that he had been paid more than $4,000 per month by another telecom executive during his gubernatorial campaign and couldn't prove he'd provided any services in return. Inverting the political adage that cover-ups are more damaging than the original crimes, his ostentatious disclosure quelled another wave of potential scandal like a controlled burn set in the path of a potentially calamitous brushfire.

But that adroit bit of political chutzpah was decidedly small potatoes compared to the high-wire act Pawlenty has been performing for the past year or so. Since getting the credit for resolving a whopping $4.6 billion budget deficit in 2003 without reneging on his no-new-taxes pledge, the governor has been mentioned as a trendy dark horse candidate for president or vice president in 2008. Pawlenty offers the obligatory disclaimer that he hasn't given a second thought to running for higher office. But actions speak louder than words, and by his actions, it is increasingly apparent that Pawlenty is putting political ambition ahead of sound financial management of the state he was elected to serve. Convincing the public otherwise has begun to strain his considerable charms.

It's hardly a secret that Pawlenty's no-new-taxes pledge is the key to any viability he might have as a national candidate. The right-wing Republican Party insiders who have done the most to promote the governor's name are Grover Norquist and Paul Weyrich. Norquist, who runs Americans for Tax Reform, is the de facto ringleader of the pledge. Weyrich, a conservative commentator and fundraiser who heads the Free Congress Foundation, flatly told the Strib that "if [Pawlenty] breaks that pledge, he's absolutely dead."

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For the moment, Pawlenty is not only very much alive, but moving up GOP ranks as his peers fall by the wayside. In recent years, Republican governors in Idaho, Georgia, Kentucky, Ohio, and Alabama have all chosen to break their pledges and raise taxes in order to supply the basic needs of their constituents without jeopardizing the fiscal integrity of their governments. The majority of these states have traditionally been staunchly conservative, suspicious of politicians, and antagonistic toward taxes. By contrast, as Rep. Ron Erhardt (R-Edina), chair of the House Transportation Committee, put it, "Minnesota is a high-service state. We've always asked for, wanted, and gotten a high level of services. And that's a major challenge right now. We don't have to go hog wild on spending, but we do need to take care of some things. Education is one; transportation is another. The whole problem, of course, is that the governor has made the pledge and he is seeking higher office, so he is trying to live with his promise of no new taxes."

Unfortunately, nearly all the easy budgetary remedies available to Pawlenty were tapped out in 2003. To balance that year's gargantuan deficit, Pawlenty used just about every stray dollar, cost shift, and financial gimmick at his disposal--and then slashed nearly $2 billion worth of services. More than $1 billion in onetime monies from the state's 1998 tobacco settlement and the reserve fund were tapped. Hundreds of millions of dollars in new or raised fees were imposed. Meanwhile, the responsibility for funding hundreds of millions of dollars' worth of services was pushed down to local property tax rolls. Even so, state funding for education declined for the first time in modern history, and tens of thousands of people were deprived of state-supported health insurance.


Because state budgets are set in two-year cycles, the 2005 session represents Pawlenty's second attempt to dodge and distance himself from the absolutely deadly "T" word by any means necessary. And the means have been many, most of them designed to obscure the fact that the budget is a mess--held together with smoke and IOUs and desperately in need of more stable and substantial sources of revenue.

"The state is running a structural deficit," says John Gunyou, the former finance commissioner under Republican Gov. Arne Carlson and the current city manager of Minnetonka. "What that means is that, for the fourth year in a row, there is not enough ongoing state revenue to keep up with ongoing state spending--and that's before you make any improvements. It's irresponsible financial management."

Pawlenty and his no-tax allies have famously said that Minnesota has a spending problem, not a revenue problem. As evidence, they frequently trumpet the fact that tax revenues will rise 8 percent, or approximately $2 billion, during the next biennium. But what they conveniently omit is that over half that increase will be consumed in replacing the more than $1 billion in tobacco settlement and reserve fund monies that were tapped in '03 and are no longer available. Or that the estimated revenues coming into state coffers contain an upward adjustment for inflation, while the projected spending requirements don't. Or that the growth in the state's population that will help to generate the revenue increase will also mean more need for services. What does it all add up to? According to Senate tax committee chair Larry Pogemiller (DFL-Minneapolis), "If you're talking about real [inflation-adjusted] dollars per capita, the governor's proposed budget for '06-'07 represents about a 2 percent decline from the previous biennium."

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