Governor asks state agencies to propose 5% cuts

I’ve previously written about the process for developing the Governor’s budget and the instructions that state agencies received as they put together budget options for the Governor to consider.

In mid-October, cabinet-level agencies received new instructions. Noting the significant risk of a larger deficit in the November 2008 Forecast, state agencies have been asked to achieve a 5% reduction in their general fund spending in the proposals they must submit by November 3.

Specifically, the directions state: “The preliminary options you submit on November 3rd should result in a 5% reduction in your total General Fund base as well as your direct appropriated Other Funds base for FY 2010-11 (excluding Federal Funds and Internal Service Funds).” The directions also say that, “unless otherwise directed, any proposed increases should be factored in” in coming up with the 5% reduction.

To give that 5% figure some context: 5% of the state’s projected general fund spending in the FY 2010-11 biennium is $1.8 billion.

What are the implications?

  • I do not think the Governor will propose 5% across-the-board cuts in his budget. In his past budgets, Governor Pawlenty has tended to take a more precise approach, so this is about developing a set of options for where cuts might be made.
  • I also don’t think that 5% is the maximum amount of cut that will be proposed in any particular area of the budget. The Governor is likely to propose larger cuts in some areas than others.
  • In addition, the Governor’s budget will likely have some new initiatives, and the cost of these new initiatives would need to be offset by actions elsewhere in the budget.

While I would assume that the Governor’s FY 2010-11 budget will try to address the budget deficit through a significant and painful amount of cuts, that does not mean the deficit will be made up entirely through cuts. We’re likely to see one-time savings through timing shifts, such as delaying payments to school districts. This move has been done to address past deficits, and its use in the 2009 Legislative Session seems quite probable.

-Nan Madden

About Nan Madden

Nan Madden is director of the Minnesota Budget Project.
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