Minnesota Held Hostage

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

The 8 percent tax revenue "increase" is just one of many feats of accounting deployed by Pawlenty. The governor, for example, accurately claims that his proposed budget will provide a 9 percent biennial increase in the state's funding formula for education. What he doesn't say is that there is no such increase for education costs that fall outside the state formula, a class of expenses that include special education and the compensatory aid used to benefit schools with an above-average number of students from poverty-stricken homes. Pawlenty likewise fails to mention that approximately $300 million of that biennial increase would come from allowing school districts to increase local property taxes. You may recall that then-House Majority Leader Pawlenty was among those who took credit for lifting the burden of education funding from property-tax payers during the "big fix" tax reform enacted in the waning days of the Ventura administration. Back then almost everybody agreed that using property taxes to fund schools offered unfair benefits to wealthier districts. But since shifting taxes onto other units of government doesn't count against his no-new-taxes pledge, Pawlenty now seems willing to risk the inevitable lawsuits challenging this inequitable funding.

It is understandable that Pawlenty plays political hardball with teachers' unions, who vote overwhelmingly against his party and fund his opponents. The union has sufficient clout to ward off the governor's no-strike proposal and his call for private school vouchers. But it is disingenuous for Pawlenty to propose that at least 65 percent of education revenue be devoted to "classroom learning." This implies that schools are bureaucratically top-heavy and could easily do more with less. But two of the most prolific sources of bureaucratic paper-shuffling involve testing and assessments required by the No Child Left Behind law and special education--each of which is mandated, and systematically underfunded, by the Republican- dominated federal government.

The bottom line is that none of the competing budgets offered by the House, the Senate, or the governor increases real per-pupil funding for Minnesota schoolchildren this coming biennium. And the per-pupil funding in this smug, wealthy "brainpower" state is already below the national average.

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But if Pawlenty's hard line on taxes has played havoc with state budgets and services, it has simultaneously had a much more bullish effect on the value of his own political stock. During last year's Republican convention in New York City, Pawlenty was treated as something of a prodigy by the right-leaning national media. No less than the Beltway Boys themselves, Fred Barnes and Morton Kondracke, stopped by to pay their respects. Pawlenty also rubbed shoulders with some of the party's power brokers at the convention, and again at this year's inauguration bash. And during that time his name has been bruited about more and more regularly when 2008 comes up.

In retrospect, the New York trip may have been a bit too heady for Pawlenty's own good. Shortly after his return, he began issuing what has become a series of proposals--on gambling, transportation, and, most recently, cigarettes--that seem specifically tailored to secure large sources of revenue for the state without appearing to break his no-tax pledge. To varying degrees, all have been political miscalculations that have exposed his ambition, tarnished his credibility, and hindered his prospects for national office.

Pawlenty's attempt to carve out a piece of Native American gaming revenue for the state contained a fistful of flaws. First of all, most of the tribes in Minnesota had signed an agreement with the state explicitly detailing the terms of their gambling practices in Minnesota, and they had never violated it. Without question, the distribution of gaming revenues was, and still is, heavily tilted in favor of the tribes, at least when compared with subsequent compacts negotiated in other states. But when Pawlenty demanded last September that the tribes pony up $350 million a year or face competition from the state for their gaming dollar, he engaged a potent foe: Gaming-rich tribes are serious political donors, and thus serious political players, in their own right. When the tribes stonewalled him, the governor's next gambit, announced during his January State of the State speech, was scarcely less ham-handed: a proposed partnership between the state and three remote northern tribes geographically excluded from the gaming windfall. All the impoverished tribes had to do was deposit an initial $200 million "partnership fee" in the state treasury, spend twice that amount acquiring land and building a Twin Cities casino, and give the state a hefty share of their profits--$100 million was a low estimate--every year.

Four months later, all but one of the northern tribes have walked away from the deal. Opponents of the arrangement have unearthed Pawlenty's own statements, made shortly after he was elected governor, saying he would not support an expansion of gambling and did not believe it was a proper role for government. His "Gaming Fairness" act has yet to make it out of committee in either the House or the Senate. Having broken his no-new-gambling pledge for the sake of his no-new-taxes pledge, Pawlenty now has nothing to show for it but a $200 million hole in his budget proposal.

If that sounds like a lot of money, it pales beside the fiscal juggling act Pawlenty has before him concerning the state's roads. Pawlenty is currently hell-bent on pushing through a $7 billion transportation funding package without raising taxes. To prove it, he just vetoed a bill approved by bipartisan majorities in the House and the Senate that would have increased the gas tax for the first time since 1988 and dedicated the proceeds to transportation infrastructure.

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