Let the budget battles begin. Facing a deficit that’s projected to be at least $4.8 billion, Gov. Tim Pawlenty unveiled his proposed budget for the 2010-11 biennium this afternoon.

The governor called for a $33.6 billion budget — or 2.2 percent less than in the current two-year cycle. His plan includes tax cuts for corporations and increased funding for K-12 education, but also mandates steep reductions in spending on higher education, local government aid and health and human services.

In addition, it relies on more than $3 billion in one-time fixes, including increased federal funding via the looming stimulus package, accounting shifts and future tobacco revenues.

“Our nation and our state faces a historic crisis the likes of which we haven’t seen since World War II,” Pawlenty said, in announcing the budget proposal. “This is bringing on a profound sense of concern and challenge for our citizens in Minnesota.”

The deficit is projected to be $4.8 billion for the next biennium, but that figure is widely expected to grow as the economy continues to flatline and jobs disappear. The current budget cycle runs through the end of June.

Under Pawlenty’s proposal, adults without children would no longer be eligible for state health insurance programs, while coverage for adults with kids would be limited to those earning less than 100 percent of the federal poverty level ($21,200 for a family of four). It’s estimated that 84,000 Minnesotans would lose their health insurance under the proposal. Despite these proposed cutbacks, the budget for health and human services spending would still increase by 9.6 percent over the next two years.

Higher education would also take a significant hit. The University of Minnesota would lose roughly $150 million in funding, while the the Minnesota State Colleges and Universities system would be out $146 million. The cuts represent an 8.2 percent reduction in spending on higher education from the current biennium.

Pawlenty also proposed additional cuts to local government aid, which has been repeatedly slashed in recent years. Under the governor’s plan, such spending would be reduced an additional 5.4 percent, to $2.9 billion.

The specter of more cuts to local government aid prompted a strong reaction from the Coalition of Greater Minnesota Cities.

“This budget will take the state of Minnesota in a direction most Minnesotans don’t want to go,” said St. Paul Mayor Chris Coleman, a vice president of the organization. “We’re all eager to work together toward a solution to the challenges the state faces, but this proposal puts a disproportionate burden on communities throughout the state of Minnesota that can simply not afford it.”

One area that emerged unscathed in Pawlenty’s budget plan is K-12 education. Pawlenty proposed increasing funding for schools by 2 percent. In return he wants all school districts across the state to implement Q Comp, a compensation system that bases teacher salaries on student performance.

Corporations would also benefit under Pawlenty’s budget plan. He proposed cutting the state’s corporate income tax by more than half — from 9.8 percent to 4.8 percent. He offered up a series of additional tax breaks for businesses aimed at spurring job growth.

The initial response from Democratic legislative leaders was wary.

“We absolutely want everybody to know that we are going to work with his budget as seriously as we can, and we assume there are some excellent proposals there,” Senate Majority Leader Larry Pogemiller told reporters at the capitol.

But House Speaker Margaret Anderson Kelliher raised concerns about the $3.2 billion in one-time fixes proposed by Pawlenty.

“I would say this budget appears to be full of some gimmicks, and we are going to take a close look at that,” she said. “It is a concern that if you build a budget completely out of those things the long-term financial health of the state could be at risk.”

Anderson Kelliher also said that Democrats will hold hearings across the state to get feedback on how to solve the budget crisis before offering up their own proposal.

Brian Melendez, chair of the Democratic-Farmer-Labor Party, was less restrained in his reaction.

“Minnesota’s tax system is already unfair,” he said in a statement. “Governor Pawlenty would make it even more unfair with tax breaks to corporations so that they can pay bigger bonuses to their executives and buy nicer artwork for their boardrooms — not create the jobs that Minnesota desperately needs.”

Republicans, not surprisingly, were more receptive to Pawlenty’s proposal.

“Thank you, Governor, for giving us a solution and helping us find our way back into prosperity,” said House Minority Leader Marty Seifert, speaking to reporters at the Capitol.

He called on Democrats to step up and offer their own proposal for dealing with the deficit.

“At some point they need to lead,” Seifert said. “We know what the problem is. So now we need solutions and we need leaders.”

More: Pawlenty’s proposed budget cuts draw angry response