Governor unallots; federal government asked for stimulus package

Governor unallots $20 million to Minnesota State Colleges and Universities

Since the state economic forecast was released a couple weeks ago projecting a $426 million deficit for the current biennium and a $4.8 billion shortfall projected for the next two fiscal years, state leaders have held press conferences and legislative hearings to devise a plan that will eliminate the short-term deficit, which is actually $271 million once the state's budget reserve is drained, as constitutionally required.

Gov. Tim Pawlenty announced this afternoon an unallotment plan to make up the $271 million shortfall. The Minnesota State Colleges and Universities system received a cut of $20 million for the current biennium. The University of Minnesota also was cut $20 million.

Other cuts include $44 million of local aids and credits to counties and $66 million of local aids and credits to cities. Health and Human Services was cut $73 million, state agencies were cut a total of $40 million, the Minnesota Housing Finance Authority was cut $4 million, the legislature's unexpended funds were cut $2.2 million, the 21st Century Mineral Fund was cut $1.5 million and the Minnesota Investment Fund was cut $700,000. You may read the full press release from the Governor's office here.

The Governor said that Minnesota State Colleges and Universities has responded well to delivering services via online. He also said that the system listened to students' concerns by keeping tuition increases low. The governor said he expects the cuts to be manageable without impacting students. The governor's press conference will be available in the press conference archives here.

In preparation for the unallotment announcement, state agency heads appeared before the House Finance Committee this week to discuss how potential cuts would be made. Chancellor Jim McCormick told committee members that the economic downturn presents the system with a dilemma, because history shows that demand for higher education goes up when the economy goes down. McCormick also said that the system is approaching the economic challenge by holding three principles central to decision-making. First, decisions will be made in a way that best serves students, second, the system will take into account how to serve the economic development needs of the state and its communities, and third, a multi-year approach will be taken. McCormick spoke of the importance of making decisions for the short term that also will position the system for the 2010-2011 biennium and beyond.

As we look ahead to the 2010-2011 biennial budget, Gov. Pawlenty said his budget recommendations, which will be released Jan. 27, would contain no tax increases. “This is not the time to add additional burdens on Minnesotans,” he said, although he might support some tax reform. Speaker of the House, Rep. Margaret Anderson Kelliher, DFL-Minneapolis, said legislators plan to tour the state to receive feedback on the governor’s budget proposal. Kelliher and Senate Majority Leader Larry Pogemiller, DFL-Minneapolis, said everything is on the table to solve the budget crisis, including potential tax increases.

“It seems short-sighted to remove any tools from the toolbox,” Kelliher said.

State Economist Tom Stinson said the February forecast is expected to be announced Feb. 25 or 26. The February forecast fine-tunes the November’s forecast with data that becomes available early in the calendar year. This forecast will be the basis for the final 2010-2011 budget decisions.

Stimulus sought

On the federal side, Congress is expected to move on a economic stimulus package early next year and President-elect Obama is rumored to want to enact it as his first piece of legislation as President. A coalition of 13 groups, including American Association of State Colleges and Universities (AASCU), the United States Student Association, the National Association of Student Financial Aid Administrators, and the Project on Student Debt, sent a letter proposing a two-year stimulus for financial aid that would increase Pell Grant funding (boosting the maximum award to $7,000), increase the Federal Work Study Program, provide emergency access to student loans for colleges that offer need-based aid, and make PLUS loans more accessible and affordable.

A coalition of 30 groups representing higher education in Washington, also sent a proposal to Congress that included student aid investments in Pell and Supplemental Educational Opportunity Grant (SEOG), infrastructure grants to provide jobs and strengthen the capacity of colleges and universities, and suggestions for how to provide debt relief to students.

State economic forecast bleak

The economic forecast released today shows a deficit for the remainder of fiscal year 2009 of $426 million. The state constitution requires a balanced budget, so lawmakers and Governor Pawlenty will start working to resolve the FY2008-2009 shortfall. The state does have a $155 million budget reserve to be used first.

As lawmakers return to St. Paul Jan. 6 for the 2009 legislative session, they will be charged with balancing the budget for the FY2010-11 biennium. Minnesota is facing a $4.847 billion deficit for the upcoming biennium.

You may find more information on the Minnesota Management & Budget Web site:

Forecast Summary


Complete Forecast


News Conference Hand-out


As a reminder, the response from DFL leaders will be webcast live at 2:00 p.m. today at www.senate.mn/media, and Gov. Pawlenty's response to the forecast that is currently taking place, will be available on by 4:30 p.m. at the same site.

Archives of the press conferences will be available at www.senate.mn/media.