MN House Democrats look to rainy day accounts to fix deficit

03/26/2008

ST. PAUL (AP) -- Just weeks after top legislative Democrats proposed building up the state's savings account, a powerful DFL-controlled House panel approved a budget blueprint that would drain more than $600 million out of rainy day funds.

The budget resolution that passed the Ways and Means Committee on Tuesday would empty a $350 million cash flow account and take $273 million from the budget reserve. That's $23 million more than Republican Gov. Tim Pawlenty wants to take out of the budget reserve, a position that has drawn criticism from Democrats.

DFL Senate Majority Leader Larry Pogemiller renewed the line of attack just hours before the House panel acted. In a commentary released to the media, he wrote that Pawlenty's plan to spend less money from the reserve would put the state "in a worse position to address the shortfall projected for the next budget."

House leaders want to tap the accounts to give public schools a little extra and protect public health care programs, nursing homes and college students from Pawlenty's proposed cuts. But they have to come up with a fix for a budget deficit projected to reach $935 million by the middle of next year.

The longer-term forecast is worse: Budget watchers expect a $1.1 billion deficit for the 2010-2011 budget period, but factoring inflation in swells the number by another $1 billion.

The budget reserve has a balance of $653 million.

Until now, Democrats who control the Legislature have released few details about their plans to address the deficit. Multiple committees are working on their own pieces of the budget, but an overall picture is just starting to emerge.

"We've got to take the problem one step at a time," said House Majority Leader Tony Sertich.

He added, "We've got to get through today to see tomorrow, and we're going to try to make some investments and decisions today so that we're in better shape down the road."

Ways and Means Committee Chairman Loren Solberg, DFL-Grand Rapids, said Republicans also drained the reserves and cash flow account when the state faced a mammoth deficit five years ago. He said his proposal would protect a dedicated health care account so those dollars can be used to improve and expand the health care system in the coming years.

But the resolution prompted pointed comments from a couple of Republicans.

"I think we're going to be in for a heck of a time next year," said Rep. Jim Abeler, R-Anoka.

Rep. Mary Liz Holberg, R-Lakeville, requested but didn't immediately get longer-term budget projections under the House blueprint, which also would tighten taxation of companies with foreign operations.

Key Democrats including Assistant Senate Majority Leader Tarryl Clark appeared at a March 4 news conference outlining "accountability goals," including a target of building up the budget reserve to 5 percent of the state's general fund. At the time, Sen. Ann Rest said meeting that goal would show bond houses "that even in the midst of a deficit, the state is in control of its budget."

Solberg is chief author of a House bill that would replenish the budget reserve in flush times until it reached the 5 percent threshold.