NEWS RELEASE FROM GOVERNOR'S OFFICE:

GOVERNOR PAWLENTY SAYS EXTRAORDINARY ECONOMIC CRISIS DEMANDS DRAMATIC REFORM OF STATE GOVERNMENT

~ Governor Pawlenty orders immediate cutbacks in state spending ~

Saint Paul – In response to today’s budget forecast announcement, Governor Tim Pawlenty said, “Minnesota has overcome tough times in the past, and we will rise to meet the challenge again. Minnesotans are innovative and resilient, and we will solve this problem.”

“This historic budget deficit will be a challenge, but it will also be a further opportunity to reform, prioritize, streamline and shrink state government, not add to the burden on Minnesotans by raising their taxes,” Governor Pawlenty said.

Governor Pawlenty announced immediate actions to begin addressing the challenge. As a first step, he directed state government agencies to immediately cut back on discretionary spending.

The Governor’s reduction order targets 10 percent of unspent operating funds in the budget period that ends June 30, 2009 and would save approximately $25-50 million that would be used to reduce the current shortfall. State agencies will submit detailed plans to meet this target by January 1. Areas exempted from these immediate state agency actions include public safety, military and veterans affairs, and corrections.

In addition to immediate state government cutbacks, Governor Pawlenty directed Minnesota Management and Budget Commissioner Tom Hanson to notify the Legislative Advisory Commission that conditions exist under Minnesota law for the Governor to use his unallotment authority to balance the budget, if necessary. The Governor and his staff will be consulting with legislative leaders regarding actions that could be taken by the legislature at the start of the 2009 session or their suggestions for unallotments prior to that time.

Unallotment is a process that may be used by the Governor to help eliminate an anticipated general fund shortfall.

These steps are in addition to hiring restrictions placed on state agencies and boards in February 2008.

The downturn in the national economy is having a dramatic impact on state governments across the country with 41 states facing deficits. “We need uncommon solutions to a common crisis facing nearly all states,” Governor Pawlenty said.

For the current two-year budget period (FY 2008-09), Minnesota has a projected shortfall of $426 million. This budget period began on July 1, 2007 and runs through June 30, 2009. The state general fund budget is $34.6 billion. The deficit for the current budget period will be partially off-set by use of $155 million in available state budget reserves.

In the upcoming two-year budget period (FY 2010-11), the budget forecast shows a projected deficit of $4.8 billion. Governor Pawlenty will submit his budget plan to the legislature by Tuesday, January 27, 2009.

The Center on Budget and Policy Priorities issued a report in November showing 41 states are facing budget shortfalls in their FY2009 and/or FY2010 budgets. The CBPP says “current estimates are that mid-year gaps total $24.3 billion – 6.6 percent of the budgets of the 29 states that have estimated the size of the gap – but they will almost certainly widen as the continuing economic turmoil causes revenues to come in below estimates in more states.”

According to the National Governors Association, at least 18 states have already cut their current budgets by at least a combined $5.5 billion.