State Sen. Tom Bakk said Gov. Tim Pawlenty’s proposed budget unallotments could leave the state with a $6 billion budget deficit in the next biennium.

Bakk, DFL-Cook, is one of the few outstate candidates for Minnesota governor on the Democratic side of the aisle.

Bakk chairs the Senate Taxes Committee, and he played a key role in the Senate budget plan that the Legislature and Gov. Tim Pawlenty couldn’t agree on. Bakk discussed Pawlenty’s unallotments and his candidacy for governor with the Albert Lea Tribune.

The Senate’s budget proposal would have been balanced in each of the next two biennium’s, Bakk said, and he said that was the fiscally responsible thing to do.

According to Bakk, preliminary statistics show Pawlenty’s budget could lead to a $6 billion budget deficit by the time the next governor takes over in the 2012-2013 biennium.

“I don’t think that the next governor, whoever that is, should have to wake up that Wednesday morning after the election and immediately have to start putting a budget together based on a $6 billion hole,” Bakk said.

The preliminary deficit after the proposed unallotments for the 2010-2011 biennium will be about $2.7 million, Bakk said. The projected deficit for the 2012-2013 budget was $3.1 billion.

That amount doesn’t include the deferred school payments, $1.8 billion, or the money Pawlenty unalloted for General Assistance Medical Care, a health care program for those he described as “the poorest of the poor.”

Bakk said he hopes to see the GAMC money reinstated. That would add about $900 million, which would bring the budget deficit to around $4 billion.

“We’re going to start with a $4 billion problem — in the hole. Where are we going to find $1.8 to pay the schools back,” Bakk said.

It’s not guaranteed the deferred $1.8 billion will be paid to the schools, because Bakk said the Legislature will need to approve the payments.

The deficit will be the first challenge the next governor will face when elected, Bakk said.

The school money was deferred into the next biennium, so Bakk said that would bring the deficit to about $6 billion for the next biennium.

 
Future of unallotments

In light of Pawlenty’s recent unallotments, Bakk said it’s likely the Legislature will send Pawlenty a bill next year  concerning the use of unallotments.

The problem, Bakk said, is that the governor has unallotment authority in the first year of the biennium, which affects the drive for the parties to compromise. Bakk said Pawlenty has set a precedent concerning how unallotment can be used.

“This is more about Tim Pawlenty than it’s about the unallotment statute,” Bakk said.

Unallotment began under Gov. Harold Stassen, who served from 1939-1943, and Bakk said many believe it’s intended to give the governor a method in the second year of a biennium to balance the budget, which is constitutionally mandated. Three of those five uses have been by Pawlenty. Gov. Rudy Perpich (1976-1979) used it once for this purpose. Minnesota governors have only used their unallotment power five times since then.

“No one thinks it was intended to be used on the first day of the biennium to kind of unilaterally impose the governor’s budget,” Bakk said.

Bakk said he would sign a bill to do away with unallotments, but he said he thinks it’s a good tool for the governor to have in the final months of a biennium to balance the budget after the Legislature is dismissed to avoid a special session.

“I think having some narrow authority is helpful, rather than having to call a special session,” Bakk said.

“I think you need it, but I think you only need it in the final two or three months of a session,” Bakk said.

“I would rather get rid of it completely than leave it how it is,” Bakk said.

 
Local government aid

Pawlenty called the mayors of Albert Lea, St. Paul and Wadena “complainers” in a May 22 WCCO radio broadcast. The mayors and other leaders had called for Pawlenty to reduce the cuts to local government aid.

Bakk called Pawlenty’s remarks a “cheap shot,” because Pawlenty is from Eagan, a town that doesn’t get or need LGA.

“The LGA is intended to be a tax-base equalizer. The cop car, the fire truck — they cost the same in Eagan as they do in Albert Lea,” Bakk said.

“Who do you suppose has more tax capacity to pay for that kind of stuff?” Bakk added.

Bakk described LGA as a revenue-sharing proposal to give towns the size of Albert Lea the ability to compete with towns the size of Eagan, which have much large tax revenue.

Pawlenty has said the cuts to LGA will be a little more than 3 percent for the first year, and 7 1/2 percent in the second year of the biennium.

But for communities with 50 percent LGA and 50 percent levy, the cut is levee plus eight, so Bakk said these are cuts on the entire budget. This means the cut is double that: 6 percent in the first year and 15 percent in the second year.

The tax rate on a building is lower in city with a lot of tax capacity, so the taxes will be lower since the tax burden is spread around more.

“A $100,000 building in Albert Lea should have about the same tax rate as a $100,000 building in Eagan. A $100,000 building is a $100,000 building,” Bakk said

 
Education

Bakk talked about a similar problem in school funding.

“Schools are part of the identity of a community,” Bakk said.

But school funding is not equal across the state, and Bakk said part of the problem is the reliance on funding from voter approved property tax levees, Bakk said these levies are often harder to pass in small towns where the property taxes come largely from homes and can be easier to pass in larger cities where there’s more commercial property absorbing the property taxes, Bakk said.

He said this is an unfair way for schools to get money. Certain communities often pass levies and others rarely do, and Bakk said this will be a challenge the next governor will face, Bakk said.

“When it comes to funding schools, I would argue we’re creating this patchwork where some districts have zero excess levy,” Bakk said.

“Then you have districts in the cities that have $1,500 a pupil. Per student,” Bakk added. “And the only reason they stop there is the Legislature has a cap on it to try and stop the disparity, because they have huge tax capacity. They have all these CI buildings that all pay to the schools.”

Bakk said he’d like to do away with the levies. To do that, he’d either let the ones that exist sunset, or another possibility would be for the state would buy them down up to $415 per pupil, which Bakk said has been done in the past.

Bakk also said the current system of funding schools per student often benefits large schools, which makes it more difficult for smaller schools to maintain a comparable curriculum.

“It shouldn’t matter where a kid lives, if he’s in Albert Lea or Moorhead or Minneapolis,” Bakk said. “You want to have available to them the same kind of curriculum — similar. Things go by the wayside when there’s not enough money.”

To illustrate how funding schools per pupil can benefit large schools, Bakk used an example of a chemistry class of eight students and a chemistry class with 16 students: both have similar costs, but the class with 16 students receives double the money.

One potential solution would be to adjust the per student payments. Bakk said there has been discussion about school receiving more per pupil for the first portion of students. After reaching a certain number of students, schools would be paid less per student.

 
Governor campaign

Bakk said one key for an outstate governor candidate will be earning the DFL endorsement.

“My main theme is going to be jobs. I’m going to talk about economic development. That’s the only way we can get out of this recession is by getting people back to work,” Bakk said.

Taxes have been a priority under Pawlenty, and Bakk said that system won’t turn the economy around.

“You can’t solve this problem by just taxing the rich; it’s too big,” Bakk said.

“What really needs to happen is we need to figure out how to get people back to work,” Bakk said.

Putting people back to work is Bakk’s plan. He said state bonding and public works projects could be a way to do that, but he said he’d also like to see the banks lending again.

If elected governor, Bakk said he could propose a budget similar to the one the senate proposed.

Bakk said one possibility would be undoing permanent income-tax cuts made in 1999 and 2000 when the economy was strong, and returning to 1998 rates.

To ease the effect on middle income households, Bakk said a fourth tier would apply to those making more than $250,000 a year.

Another possibility is a income tax surcharge, which was a tool used during the 1981-82 recession. In 1982, that surcharge was 10 percent, meaning someone who paid $3,000 in state income taxes paid an extra $300.

Bakk is on a media tour that will span newspapers and media outlets in towns like Austin, Mankato, Owatonna, Faribault, Winona, Red Wing, Rochester, Fergus Falls, Wadena, Brainerd and Grand Forks.