Despite deficit, Pawlenty pitches sales tax cut in budget

Saying that “The economy in our country is under great strain,” Gov. Tim Pawlenty proposed a sales tax cut of one-eighth percent on Friday as part of his supplemental budget proposal.

The move is something of a surprise, as the state faces a $935 million shortfall in the state’s biennial budget.

The Republican governor proposed $341 million in budget cuts, as well as utilizing $250 million each from the budget fund and the health care access fund.

While the budget proposal has no significant cuts to K-12 education, it would cut approximately $53 million in higher education spending, split roughly equally between the University of Minnesota system and the Minnesota State Colleges and Universities (MnSCU) system.“We tried to be balanced and we tried to be reasonable in these proposals,” said Pawlenty in a press conference outlining his budget. “If you take all of these changes into effect, the [increased] rate of spending in the state budget goes from 10.3 percent to 9.2 percent.”

The budget would not cut any local government aid, and Pawlenty said he did not support immediate changes in eligibility for state health-care aid, though he was open to revisiting the issue in the future. Pawlenty also is proposing a 4 percent cut in the budget for state agencies, though the exact rate of budget reduction could vary from agency to agency.

Pawlenty blamed the shortfall on the slowdown in the housing market and a “major credit crisis,” which he said was putting pressure on the economy.

While Pawlenty’s proposal cuts taxes overall, it would reduce the rate of property tax credits given to those renting their homes, from 19 percent to 16 percent.

Democrats signaled a willingness to work with Pawlenty, but stopped far short of endorsing the measure.

“With any budget, the devil is in the details,” said House Majority Leader Tony Sertich, DFL-Chisholm, in a statement given to Minnesota Monitor. Sertich said the legislature would “carefully study” the proposal, and added, “The Legislature is ready to work with the governor to balance Minnesota’s budget.”

Assistant Senate Majority Leader Tarryl Clark, DFL-St. Cloud, agreed. “We want to be careful not to sacrifice those things that are sacred to Minnesotans,” she said. “At the same time, passing the transportation, bonding, energy and health care bills will help Minnesotans get back to work and protect their financial security.”