Is it a coincidence that six months after Tim Pawlenty finished his term as Minnesota’s governor the state government has been shut down by an impasse over how to balance the budget? Not according to Minnesota Democrats. Pawlenty’s home state critics say he contributed to the predicament in three ways: he failed to correct the structural imbalance in Minnesota’s finances, he balanced his own budget by pushing expenses into the future for which the bills are now coming due and he abdicated his leadership responsibility to help Minnesota find a sustainable budget trajectory.
“Pawlenty’s policies and leadership, or lack of it, on the budget in Minnesota created the setting for the current crisis that we’re in,” says Minnesota state representative Jim Davnie. Pawlenty was insistent during his tenure on sticking to his pledge not to raise taxes.
With the exception of a cigarette tax he agreed to during the 2005 shutdown he stuck to that pledge. (Pawlenty is fond of claiming that he never raised taxes as governor, reasoning that the cigarette tax is a “health impact fee,” with the funds earmarked for healthcare costs to defray the social cost of smoking.) With the state government starved for revenue, Minnesotans have been paying through other means: local property taxes rose regularly to pick up the slack in funding for government services, although Pawlenty then signed a property tax cap in 2008. Meanwhile the state government imposed brutal budget cuts. For example, the University of Minnesota is freezing wages, cutting costs and raising tuition to compensate for a decrease in state funding.
Without increasing revenue, though, Pawlenty was unable to cut spending sufficiently to balance the budget. Instead, “Pawlenty used every budget gimmick and shift,” says Kristin Sosanie, communications director for the Minnesota Democratic Farmer-Labor Party. “He borrowed money from K-12 schools and put off payments to falsely balance the budget.” Specifically, since Minnesota budgets on a biannual cycle, the state had given 90 percent of funding for education to localities in the first year and 10 percent in the second year. Pawlenty shifted the balance to 70-30, making his last budget seem balanced but leaving a $1.4 billion hole in the budget that Governor Mark Dayton is trying to balance now. Other “budgetary duct tape” used by Pawlenty in his last year in office, according to the Minnesota Taxpayers Association, includes delaying $152 million in tax refunds. All told, when Pawlenty left office there was a projected $6.2 billion budget shortfall, which Sosanie notes is “the largest in our state’s history and the fourth largest among all states as a percentage of our state budget.” (Federal aid and measures taken by Dayton have slashed the deficit to $5 billion, which is the amount that the current shutdown fight is over.)
Democrats argue that Pawlenty’s budget gimmickry was worse than just leaving a mess for his successors to clean up. “It was all a way to avoid having a conversation about what do we want government in Minnesota to do and how do we pay for it,” says Davnie.
Non-partisan experts on Minnesota politics give Pawlenty a more mixed scorecard. “When Pawlenty took over [in 2003] there already was a structural budget deficit,” notes Lawrence Jacobs, director of the Center for the Study of Politics and Governance at the University of Minnesota. “Revenues and taxes had been cut during the 1990s while the economy was soaring. Democrats, [former Governor] Jesse Ventura and Republicans were all complicit in that. Pawlenty comes in, the economy is falling down and the structural deficit is already in place. There are two ways of looking at that: blame him for not fixing that, or credit him for muddling through without raising revenues, depending on your political perspective.”
In other words, if you don’t have an ideological fixation with opposing tax increases, then Pawlenty failed. It’s a good thing for Pawlenty’s presidential prospects, though, that he either does share that conviction, or knew that he must act like it if he wanted to compete in a Republican presidential primary. Even so, “muddling through,” as opposed to cutting government down to size, is not a great boast for Pawlenty to run on.
The Pawlenty campaign declined to comment specifically for this story, saying through a spokesperson that “he’s addressed this multiple times,” in television interviews. Typically Pawlenty does so by making the non-sequiter argument that his last year in office did not end in deficit. Pawlenty also maintains it is the fault of localities that raised property taxes to cover the state aid shortfall, since they could have opted to slash services instead.
Value judgments about the proper role of government aside, Pawlenty’s tendency to burnish his image with questionable claims about his budgeting record is indisputable. As Jacobs notes, “Property taxes and city taxes went up, and that was a direct result his cuts in aid to local governments. Pawlenty’s talking point about state taxes ignores the revenue picture for the whole state, where other parts of the state had to make up for his cuts.”
Perhaps most troubling for Minnesota’s future is that Pawlenty participated in undermining the state’s historical bipartisan agreement to adequately fund economic investments. In 1971, Democrats and Republicans, responding to voter discontent over rising property taxes, which funded public education, struck a deal: the state took over the vast majority of education funding so as to hold down property taxes. But the deal was about more than just taxes. Minnesota, seeing the decline in the Rust Belt and flight to warmer Southern states, needed a way to compete economically. Investing heavily in education and other public goods like transportation became its solution. “There was partisan fighting on other issues, but agreement on that because it was the state’s economic model,” says Jacobs. “That agreement has collapsed.” Pawlenty, and other conservative Republicans, prioritized low taxes and spending ahead of that as a priority. The result? Minnesota is losing its historical edge in education.
Now Dayton, a Democrat, has succeeded Pawlenty. He won in a terrible year for his party on a platform demanding that the rich pay their fair share of social costs. The current budget battle pits his commitment to coupling spending cuts with some revenue increases with the new, right-wing Republican majority in the statehouse refusing any tax increases. It’s the federal budget battle in miniature. And, much like in Washington, the former Republican chief executive is partly to blame for the fiscal mess he left.