Republican Minnesota Governor Tim Pawlenty stunned Democrat Leadership in both houses of the Minnesota Legislature during the waning days of the 2009 legislative session by announcing he would not allow them to wait for a special legislative session to erase the state’s $2.7 billion budget deficit and that his administration will instead balance the budget left unbalanced by the legislature through a series of line-item vetoes coupled with the process of “unallotment” afforded the Governor by the State Constitution.

While this decision is riddled with high-stakes political overtones, entities that do business with the state should take an immediate interest in this administration that could – in the swipe of a pen - have a significant impact on your business relationship with the state.

Will your voice be heard?

Here’s the process, however simplified. The Minnesota Legislature adjourned on Monday, May 18 at midnight as required in the state’s constitution. The final tax bill will be vetoed in the coming hours due to the heavy reliance upon tax increases to achieve balance. The governor plans to sign the various appropriations omnibus bills that remain, exercising his line item veto where appropriate. That done, the administration will move quickly get the state budget in “unallotment form,” a technical process undertaken by the Minnesota Dept. of Finance, overseen by Commissioner Tom Hanson.

The Minnesota Constitution requires the state’s budget to be in balance by June 30, 2009, when the current biennium ends. (Minnesota’s budget is biennial.) So the “unallotments” must be completed by June 30, restoring balance to the state budget.

The Governor has not indicated what specific programs will be cut. However, likely targets include higher education (Minnesota State College and University System and the University of Minnesota), aid to local governments (hospitals, nursing homes, roads and bridges, public safety, etc.), health care and welfare and possibly agriculture (ethanol payments?). Governor Pawlenty has indicated that K-12 education will be held harmless, albeit through the use of accounting shifts, which will certainly impact schools in out-years.

These entire budget cuts, some several hundred million dollars in total, will be made by Tim Pawlenty with the input of his commissioner before June 30, 2009. Will your voice be heard?

Contact WeberJohnson for more information.